Japan: Recession!

November 17th, 2014
in News, econ_news, syndication

Econintersect:  Japan has entered its second recession in three years, its fourth in the last six years and its fifth of the 21st century.  GDP contracted by 0.4% in the third breaking-news-130px7quarter (-1.6% annual rate), following a decline of 1.9% in the preceding quarter (-7.3% annual rate).  Reuters had reported an expectation for a gain of 0.5% (2.1% annual rate).  The Tokyo stock market reacted with a big sell-off, the Nikkei 225 Index down 3% at last report.  It is considered likely that there will be a "snap" election called which could cost Prime Minister Shinzo Abe some support in parliament.  Some suggest that Abe may actually have a stronger hand to be more aggressively with fiscal easing because of the setback.  That will depend on how much support his party loses in the elections.

Follow up:

The following three graphics from Trading Economics (two annotated by Econintersect) show three time-period views of japan's GDP data. The latest two quarters of contraction are the first two following the increase of Japan's consumption tax from 5% to 8% on 01 April this year.  Econintersect suggests that one can make strong monetary expansion moves but take the expansion away with ill-advised fiscal policy.  See GEI News report on that conflict from July 2013.

japan-gdp-growth-3Q-2014

japan-gdp-growth-2000-2014-annotated

Looking at annual data (calendar years) Japan experienced two+ years of expansion after reaching recovery from the 14-year depression (1996-2010) but has been contracting again 2014.  Only a strong fourth quarter can avoid at least a hiatus in the expansion started in 2011.  Some analysts are expecting a stronger fourth quarter, but are these the same ones who expected the third to be positive?

japan-gdp-1990-2014-annotated

Sources:










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