Japan's economy contracted in the third quarter at the fastest pace since last year's earthquake as exports slumped and consumer spending slid.
Gross domestic product fell an annualized 3.5 percent in the three months through September, after a revised 0.3 percent gain the previous quarter, the Cabinet Office said in Tokyo today. The median of 23 estimates in a Bloomberg News survey was for a 3.4 percent drop. Barclays Plc and Societe Generale SA are among those forecasting another decline this quarter, meeting the textbook definition of a recession.
"September's data showed no mercy," Yoshimasa Maruyama, chief economist at Itochu Corp. in Tokyo, said before the report. "There's little doubt that Japan is in recession."
A global slowdown and a flare-up of anti-Japanese sentiment in China dragged down exports and production in September. With slumping corporate profits also threatening to damp investment, pressure may remain on the Bank of Japan to expand monetary easing and on Prime Minister Yoshihiko Noda to consider a supplementary budget.
The BOJ may add to stimulus at a Dec. 19-20 meeting if the U.S. Federal Reserve also acts at its gathering on Dec. 11-12, said Masaaki Kanno, chief economist at JPMorgan Securities Japan Co. and a former central bank official. American monetary expansion risks weakening the dollar and driving up the yen, making Japanese exports less competitive.
The yen gained 0.1 percent to 79.44 per dollar as of 9:01 a.m. in Tokyo. The Nikkei 225 Stock Average fell 0.6 percent.
The world's third-largest economy will probably shrink at an annual pace of 0.4 percent this quarter, according to the median forecast of 24 economists surveyed by Bloomberg News. That would be the third technical recession since 2008. Japanese recessions are officially defined by a government-charged panel that considers data beyond GDP figures.
Barclays expects an annualized 1.7 percent contraction in GDP this quarter and 0.2 percent growth in 2013.
Private consumption declined at an annualized 1.8 percent pace last quarter, and posted the first back-to-back drop since the six months through March 2009. The GDP deflator, a measure of price changes across the economy, fell 0.7 percent last quarter from the same period of 2011.
BOJ Governor Masaaki Shirakawa and his colleagues expanded their asset-purchase program for the second time in two months on Oct. 30. Some BOJ board members said in an Oct. 4-5 meeting that the economy may have entered a "recessionary phase," the minutes of the meeting showed.
Japanese companies have been hurt by the worsening economy, with data compiled by Bloomberg showing an aggregate 31 percent decline in net income at the 191 companies listed on the Nikkei 225 Stock Average to report July-to-September earnings through last week.
Sharp Corp. (6753) and Panasonic Corp. (6752) expect to lose a combined 1.2 trillion yen ($15 billion) this fiscal year, while Hitachi Construction Machinery Co. (6305) and Nissan Motor Co. (7201) cut their full- year profit forecasts and cosmetics company Shiseido Co. (4911) plans to cut costs.
Machinery orders, an indicator of capital spending, fell the most in four months in September, data showed last week, while industrial production slid the most since the earthquake and exports dropped 10 percent.
Evan as Noda's administration retains the option of a supplemental budget, the room for fiscal maneuver has been limited by the political opposition's refusal to give his administration the authority to borrow to pay for this year's deficit.
Local governments have complained that public works spending and subsidies for the poor are in danger as funding from Tokyo dries up. Debate on issuing debt to cover about 40 percent of spending for this fiscal year began in the Diet last week.
On Oct. 26, the government said it would tap discretionary funds to pay for 750 billion yen in fiscal stimulus and Finance Minister Koriki Jojima said last week the government will take more steps to tackle current "severe" economic conditions.--Courtesy of Bloomberg News