Econintersect: For the fifth time in the last 15 years Japan has crossed the threshold 
that nominally defines a recession. With numbers announced this morning (10 December 2012) the country has now had two consecutive quarters of GDP contraction.
The final report for the third quarter GDP (three months ending September) was unchanged from the previous estimate (-0.9% quarter-to-quarter). The new number was the revision of the second quarter GDP to -0.1% (annualized).
The tiny negative number for 2Q seems like splitting hairs – how much different is that from no change? But whether the second quarter is really negative or not, it is clear that Japan has not seen any GDP growth over the past six months. Whether there is actually a recession or not, the government will certainly be pressed for more stimulus by the political opposition led by Shinzo Abe.
Many think that negative 2Q or not, the numbers for the fourth will be strongly negative so the nominal definition will be clearly established for recession when the current quarter is completed. From the Financial Times:
“Whether or not Japan is in recession is determined by the Cabinet Office, several months later,” said Tomo Kinoshita, chief economist at Nomura in Tokyo. “Before today’s data, we had thought that it was very likely that Japan had entered a recession in the third and fourth quarters. Today’s data strengthens that case.
“Earlier this year we had thought that robust public investment would drive Japan’s growth this year. [The weak GDP data] shows how vulnerable Japan is to external demand conditions in Europe and Asia.”
Bloomberg reports that their survey of 21 economists gave a median estimate of 0.8% decline gfor the third quarter. The same group estimated a decline of 0.4% for the fourth quarter, with strong growth (1.6% which is 6.4% annual rate) for the first quarter of 2013.
The GDP decline is purely domestic as the current account (trade balance) surplus was stronger than expected in the third quarter. The surplus for the two most recent months reported were 376.9 billion yen ($4.2 billion) for October and 503.6 billion yen ($5.6 billion) for September.
Sources:
- Japan sinks into fresh recession (Ben McLannahan, Financial Times, 10 December 2012)
- Japan Sinks Into Recession as Abe Calls for More Stimulis (Keiko Ujikane, Bloomberg, 10 December, 2012)
