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Japan slips into “quintuple dip” recession

Japan has slipped into recession for the fourth time since the financial crisis, as GDP fell by 0.2% in the third quarter of the year. The contraction follows a 0.7% fall in the second quarter; two consecutive quarters of negative growth mark the technical definition of recession.

Japan has slipped into recession for the fourth time since the financial crisis, as GDP fell by 0.2% in the third quarter of the year. The contraction follows a 0.7% fall in the second quarter; two consecutive quarters of negative growth mark the technical definition of recession (1).

The benchmark Nikkei 225 fell sharply in opening trade on Monday as the disappointing growth figures were compounded by global market weakness in the wake of the terror attacks in Paris. The market recovered to a 1% decline in later trading as traders reassessed the likelihood of further stimulus measures from the Bank of Japan. “The headline was weak, but the market is shifting to expectations for more measures,” said Mitsushige Akino, Fund Manager at Ichiyoshi Asset Management (2).

Businesses continue to be reticent to use record profits to increase investment or benefits for the workforce – a key stumbling block for Prime Minister’s Shinzo Abe’s “Abenomics” policies. The government, however, continues to insist that the long-awaited Japanese economy is in motion. “While there are risks such as overseas developments, we expect the economy to head toward a moderate recovery, thanks to the effect of various (stimulus) steps taken so far,” stated Economics Minister Akira Amari (3).

There is, however, little evidence that the Japanese economy is entering a downward spiral. Due to Japanese demographics the economy is always close to a recession, although the contraction points to sluggish underlying demand (4).

 

(1) The Telegraph. ‘Japan returns to recession but hopeful signs suggest recovery is on its way’. telegraph.co.uk

(2) The Guardian. ‘Japan ‘s ‘quintuple dip’ recession delivers a fresh blow to Abenomics’. theguardian.com

(3) BBC News. ‘Japan’s economy falls back into recession again’. bbc.co.uk

(4) Financial Times. ‘Japan falls back into recession’. ft.com