Japan’s Economy Contracts in the Third Quarter Pushing it into Recession

Latest flash reading showed, Japanese economy shrank by 0.2% in third quarter or 0.8% annualized pace after shrinking -0.3% in the second quarter.

These developments have come as little surprise to Bank of Japan officials, who had largely factored in the recession in future growth estimates, and now expects growth to recover in upcoming quarters as consumption and factory show signs of a pick-up.

This is the fourth time Japan, the world’s third largest economy, has entered recession since the global financial crisis.

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.

Japan’s economy has fallen back into recession.

Private demand fell 0.5 percent after falling 0.2 percent in the previous quarter. Statistics New Zealand reported that N.Z. core retail sales increased to a seasonally adjusted 1.0%, up from 0.0% in the September whose figure was revised down from 0.1%.

The figure, which is preliminary, was marginally worse than the market expectation for a 0.1 per cent decline, according to a Bloomberg News survey, and followed a similar shrinkage in the previous quarter.

Japanese companies continue to be wary of using their record profits to raise wages and invest in the economy – a major challenge for Prime Minister’s Shinzo Abe’s “Abenomics” policies. The BOJ holds a policy meeting later this week.

However, a few analysts say the disappointing GDP print may not spur the Bank of Japan (BOJ) to step up its already massive quantitative easing (QE) program when it convenes its monthly two-day policy meeting on Wednesday.

“China’s economic slowdown did not have a big impact on Japan’s Q3 GDP, but we could see a negative impact in the following quarters”, said Shuji Tonouchi, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities. And despite declining growth, the government is positive that a recovery is underway.

Capital expenditure also fell 1.3 percent in the July-September period – more than the forecast of a 0.4 percent decline.