Japan’s economy slid into a recession for the first time since 2001, the government said Monday, as companies sharply cut back on spending in the third quarter amid the unfolding global financial crisis.
The world’s second-largest economy contracted at an annual pace of 0.4 percent in the July-September period after a declining an annualized 3.7 percent in the second quarter. That means Japan, along with the 15-nation euro-zone, is now technically in a recession, defined as two straight quarters of contraction.
The result was worse than expected. Economists surveyed by Kyodo News agency had predicted gross domestic product would gain an annualized 0.1 percent.
Japan’s Economy Minister Kaoru Yosano said following the data’s release that “the economy is in a recessionary phase.”
But the worst may be yet to come, especially with dramatic declines in demand from consumers overseas for Japan’s autos and electronics gadgets. Hurt also by a strengthening yen, a growing number of exporters big and small are slashing their profit, sales and spending projections for the full fiscal year through March.
Toyota Motor Corp., for example, has cut net profit full-year profit forecast to 550 billion yen ($5.5 billion) — about a third of last year’s earnings. And Sony Corp., whose July-September profit plunged 72 percent, expects to make 59 percent less this fiscal year than last year.
“What we’re starting to see is the extent of deterioration in external demand start to weigh more heavily on the Japanese economy,” said Glen Maguire, chief Asia economist at Societe Generale. “And I think looking forward, there’s every indication that dynamic is going to continue.”
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For Japan, Obama Signals A Shift Closer to China, Away From “Traditional” Asian Allies
The Japanese do not share the jubilation seen almost everywhere following the election of Barack Obama.
Economically, Japan sees an Obama White House funding the American Big Three Automakers: GM, Chrysler and Ford. And that’s bad for Japan’s automakers.
Japan, for one nation, prefers to allow the “system” to work without more government intervention.
On the foreign policy level, Japan fears North Korea’s erratic behavior and nuclear capability. It also fears China as a tradition enemy of immense wealth, population and size which can easily overwhelm the economy of Japan.
Japan fears the presidency of Barack Obama. “So far, no good,” one senior diplomat told Peace and Freedom.
John E. Carey
Wakefield Chapal, Virginia
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