News About Banking Industry

Japan slips into a recession in 3rd quarter

Japan’s economic output shrank in the most recent quarter, throwing the world’s third-largest economy back into recession and presenting another setback for Prime Minister Shinzo Abe’s plans for reviving the nation’s long-suffering economy. Japan’s Cabinet Office announced Monday that gross domestic product, the measure of a nation’s goods and services, fell at an annualized rate of 0.8% in the July-September quarter, and shrank at a seasonally adjusted 0.2% from the three months ending in June. 

A recession is defined as two consecutive quarters of contraction. Tokyo financial markets closed lower after the announcement Monday. The 225-issue Nikkei average lost 203.22 points, or 1.04%, closing at 19,393.69. The Topix index of all first-section issues fell 14.30 points, or 0.9%, closing at 1,571.53. Akira Amari, minister of state for economic and fiscal policy and a key adviser to Abe, said at a press conference Monday that Japan’s recovery remained on track despite some risks in overseas economies, according to Kyodo News Service.

A key goal of “Abenomics” has been to spur very low inflation by convincing businesses to grant wage hikes and make capital investments. “The problem is that capital spending is not robust, which indicates that the mindset of company executives remains deflationary,” Amari said at the news conference.

Paul Sheard, chief global economist and head of global economics and research at Standard & Poor’s Ratings Services, said at a news briefing just prior to the announcement Monday that Japan’s economy “is sort of limping out of a self-induced recession last year, which was triggered by the consumption tax hike.”