Japan falls into recession after GDP contracts in Q3

In a preliminary estimate, the Cabinet Office said gross domestic product shrank at an annualized rate of 0.8 per cent. Economists surveyed by news agencies had expected a contraction of between 0.2 and 0.3 per cent, on average. In the third quarter, the economy contracted with a drop in business investments.

The release also come just four days before the Bank of Japan announces its latest monetary policy decision, although no change in the speed, composition or size of the bank’s current QQE program is expected. The problem for Abe is that the company is the exception to the trend of reduced capital spending among Japanese automakers, which are increasingly relying on demand for growth. Furthermore, a few important elements of the economy have been notching up decent growth, including consumption, which rose at a 2.1% annual pace in the third quarter.

Business investment subtracted 0.2 percentage point from growth.

Japan’s real GDP last contracted for two straight quarters in the April-September period of 2014, when the economy slumped after the country’s consumption tax rate was raised to 8 percent from 5 percent in April that year.

Abenomics policies were meant to jolt the Japanese economy out of stagnation. Kuroda had said in September it wouldn’t be unusual for the economy to grow in the July-September quarter.

PARIS JITTERS: The attacks in Paris last week are likely to hurt a few sectors of the economy.

EPA A pedestrian walks past a markets indicator board in Tokyo, Japan.

Economics minister Akira Amari said a lack of workers available for public works projects worth billions of pounds restricted the government’s ability to bolster the economy. “The fundamentals [of the economy] are not bad”. “As for the question of whether they will act, it’s hard to say”.

Poor economic growth has fueled Prime Minister Shinzo Abe’s critics, who have been quick to argue that his “Abenomics” plan – a massive bond-buying campaign, coupled with structural reforms and stimulus from the central government – has largely failed to dramatically boost growth.

Amari said on Monday after the data that an extra budget may focus on addressing Japan’s demographic issues and to help alleviate the effects of the Trans Pacific Partnership trade pact and the government would take a flexible approach to fiscal and economic management.

Other economists have painted an even bleaker picture, with Izumi Devalier, an economist at HSBC Holdings Inc., maintaining that even if the bank did roll out additional easing measures, it would not be enough to reverse the decline in capital expenditure marked in the third quarter.