Japan’s economy contracted in the third quarter sending the country into a technical recession, raising doubts about the government’s policy choices. Meg Teckman reports.
Japan falls into its second technical recession in two years, and the fifth since the global financial crisis. GDP in the world's third-largest economy shrank 0.8 percent July-September, sharper than forecast. Japan previously had two consecutive quarters of contraction following last year's sales tax hike which took a major chunk out of consumer spending. Weak capital expenditure and dwindling inventories were large contributors to the negative data. A blow to Prime Minister Shinzo Abe's call for Japan's companies to put their record profits to use for business investment and wage hikes. In contrast, private consumption - which makes up about 60 percent of GDP - saw a modest rise. And this consumption rebound may buoy the government's view that the economy will pick up in the current quarter. Economics Minister Akira Amari: (SOUNDBITE) (Japanese) JAPANESE ECONOMICS MINISTER, AKIRA AMARI, SAYING: "While there are risks like overseas developments, we expect the economy to head toward a moderate recovery thanks to the effect of various steps taken so far." The fragile state of the economy puts more pressure on the Bank of Japan to increase the country's massive stimulus program when it meets this week to head off a failure for Abenomics. ENDS