By IRNA,
Tokyo : Japan, the world’s second-largest economy, has officially slipped into recession, hurt by weak export growth and steep cuts in corporate spending amid the worsening global slowdown.
Japan’s gross domestic product shrank at an annual rate of 0.4 percent from July to September after declining a revised 3.7 percent in the previous quarter, the government said Monday.
It was the first time since 2001 that Japan’s economy has contracted for two consecutive quarters, the definition of a recession.
The decline adds to the grim outlook for the global economy, after Hong Kong and the European Union released data on Friday that showed they were in recession. Europe’s largest economy, Germany, also announced last week that it was in recession.
The United States may follow, after Washington said last month that the American economy contracted in the third quarter.
The figure was worse than expected by economists, who had predicted Japan’s $5 trillion economy would narrowly avert a recession by posting slight growth.
“Downside risks to the economy are growing further,” Kaoru Yosano, the economic minister, told reporters.
“Japan is in a very serious situation.”
Until now, Japan has stood apart from most other developed nations because its banks were relatively unscathed by the financial crisis.
But Monday’s data showed that America’s woes reached Japan via its exports, as Americans spend less on Japanese cars, televisions and machine tools.
Japan is particularly affected by these swings in the United States, the world’s largest economy, because it has been largely dependent on sales abroad for growth.
Domestic consumption has remained weak in this rapidly aging society, keeping Japan’s overall growth rates anemic even during its long growth cycle that extended from 2002 until this year.
Faltering demand overseas combined with higher imported energy prices reduced growth in Japan from 0.4 percent in the previous quarter to 0.2 percent in the July-September quarter, according to Monday’s figures.
Spending by Japanese companies fell by 1.7 percent from the previous quarter, its third straight decline. Household consumption rose 0.3 percent from the previous quarter.
Economists say the worst is yet to come, both in Japan and abroad.
The figures do not include most of the financial panic since September, which has sent Tokyo stock markets to 26-year lows.
Economists say they expect Japan to have an even more severe contraction in the current quarter, ending in December, as spooked American consumers and businesses cut back even further on spending.
Economists said the weakness was also expected to feed into the Japan’s domestic economy, as declining exports hurt corporate profits, pushing many smaller companies into bankruptcy.
This could lead to declining wages and rising unemployment.
“The really dark period hasn’t even reached us yet,” said Hideo Kumano, chief economist for Dai-Ichi Life Research Institute, based in Tokyo.
“The stock declines are going to have a freezing effect. The end-of-year retail sales season will be miserable.” Kumano and other economists predicted Japan’s downturn would worsen until about the middle of next year.
That is when economists expect the benefits from government spending packages in Japan and its biggest export markets, China and the United States, to revive activity.
Economists said the decline would probably increase calls for Tokyo to take more steps to stimulate growth, beyond the $70 billion in stimulus already pledged.
But few economists said they expected more action as politicians prepared for national elections that must be held before next September.
The Bank of Japan, the central bank, also moved last month by cutting overnight lending rates to 0.3 percent.
Some economists said a true recovery would take another year at least, as the United States combats deep structural problems in its housing market and banking system.
Takahide Kiuchi, senior economist at Nomura Securities in Tokyo, said he expected the downturn to last until late 2010, with some respite next year from stimulus measures.
Economists say they expect Japan’s current recession to be milder than in the United States.
The Organization for Economic Cooperation and Development has forecast the Japanese economy will shrink by 0.1 percent next year, versus declines of 0.9 percent in the United States and 0.5 percent in the European Union.