Japan recession worse than thought—data

In this Wednesday, Nov. 19, 2014 photo, a man walks in front of the Bank of Japan headquarters in Tokyo. Japan’s economy contracted 1.9 percent in annual terms in the July-September period, according to revised data released Monday, Dec. 8 that confirmed a recession in the world’s third-largest economy and could sway the outcome of an election on Sunday, Dec. 14. AP

TOKYO — Japan’s economy contracted more than initially thought in the July-September quarter, revised official data revealed Monday, showing the world’s third largest economy sank deeper into recession.

The economy shrank 0.5 percent quarter-on-quarter, worse than the 0.4 percent estimated in initial data released three weeks ago, the Cabinet Office said.

The reading was much worse than the median forecast of a 0.1 percent quarterly shrinkage in a survey by the Nikkei economic daily.

The drop came after a 1.7 percent contraction in the April-June quarter, meeting a common definition of a recession as two consecutive quarters of negative growth.

On an annualized rate, the economy shrank 1.9 percent in the third quarter against the initially-estimated fall of 1.6 percent.

Prime Minister Shinzo Abe over the past two years has pressed ahead with a pro-spending growth bid, dubbed “Abenomics”, which boosted stock prices and pushed the yen down.

Where it had been credited with success up until the effects of a sales tax rise in April this year, Monday’s revised data showed the economy in fact contracted 0.4 percent in the last quarter of 2013.

It expanded 1.4 percent in January-March on shoppers’ last-minute buying binge before the tax rise.

Japan’s VAT rate rose from 5.0 percent to 8.0 percent on April 1, hitting consumers.

Private consumption picked up only 0.4 percent after plunging 5.1 percent in the April-June period, the latest data showed.

Private residential investment dived 6.8 percent while private-sector corporate capital spending fell 0.4 percent.

But Marcel Thieliant, Japan economist at Capital Economics, said the economy could return to growth in October-December.

Companies’ inventory adjustment was a large drag and overstated the weakness of the economy as some monthly data was encouraging, he said.

“The upshot is that the economy likely returned to growth this quarter,” he said in a note.

Separate data from the finance ministry showed Japan posted an 833.4 billion yen surplus in October on its current account, reversing a deficit of 154.3 billion yen thanks to a weaker yen and lower oil prices.

The current account is the broadest measure of the country’s trade with the rest of the world.

Income jumped with higher gains from equity and other direct investment, as well as from investment in financial items, partly inflated by a lower yen.

The deficit on the services section was more than halved as the number of foreign tourists soared 37 percent to hit a single-month record.

Faced with poor economic data last month, Abe delayed a second tax hike planned for next year to 2017.

He also dissolved the lower chamber of parliament for snap elections on December 14, two years ahead of schedule, as he seeks to bolster his public support.

The tax rises are aimed at paying down Japan’s enormous national debt, but they have put Abe in a tricky position as he tries to balance them with his growth plan.

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