Japan’s economy slumps back into recession territory

16th November 2015


Preliminary estimates show that Japan’s economy contracted by 0.8% on an annualised basis in the three months to the end of September.

Growth slumped by 0.2% in the third quarter from the previous one.

The country is now in technical recession territory as this marks the second straight quarterly contraction in GDP.

The world’s third largest economy has been in recession no less than four times since the financial crisis.

According to research group Capital Economics the result was a touch weaker than most had anticipated but the bad news was partly offset by an upward revision to the second quarter figures, from a 0.3% quarter-on-quarter drop to a milder 0.2% decline.

Marcel Thieliant, Japan economist at the group said: “With rising slack dampening price pressures, we remain convinced that more monetary stimulus will eventually be needed.”

But he highlighted that policymakers have shown “considerable reluctance to respond to weaker growth with additional stimulus as underlying inflation has accelerated”.

Thieliant does not expect that the Bank of Japan’s will respond to today’s data by stepping up the pace of easing at its meeting later this week.

Looking ahead, however he said that firms’ forecasts for industrial production suggest that the economy “should start to recover this quarter”.

“We think that growth in the current fiscal year will be closer to 0.5% rather than the 1.2% projected by the Bank of Japan at its end-October meeting,” he added

“We therefore remain convinced that more stimulus will eventually be needed, and now believe that the January meeting is the most likely venue for its announcement.”

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