The Japanese economy recorded a decline in activity in the last quarter for the first time since last year, pressured by weakening economic activities worldwide and tensions in relations with China, and is on the right path to sliding into recession.
The decline in gross domestic product (GDP) by 0.9 percent in the period from July to September is in line with expectations, although the drop in capital expenditure, by as much as 3.2 percent, significantly exceeded expectations. Thus, among others, Sony and Panasonic reduced planned spending to cope with significant losses related to intensified competition and a strong yen.
The last time the economy recorded a decline in activity was in the last three months of last year, when it decreased by 0.3 percent.
On an annual basis, GDP decreased by 3.5 percent, according to government data released on Monday.
In the first half of the year, the Japanese economy recorded higher growth than other G7 members thanks to strong personal and public spending on rebuilding the country from the effects of last year’s earthquake.
Meanwhile, activities have slowed down, prompting the government to revise down the GDP growth figure for the period from April to June, from 0.2 to 0.1 percent.
The recovery of the economy due to reconstruction is faltering, and the government acknowledged last week that its leading economic indicators index has fallen to a level indicating recession.
– I cannot deny the possibility that Japan has slipped into recession – admitted Economy Minister Seiji Maehara to reporters after the data was released. Recession is typically defined as two consecutive quarters of declining activity.
