Japan's economy contracted in second quarter
Wednesday, 13 August 2008
TOKYO, Aug 12 (AFP): Japan is expected to report Wednesday that gross domestic product shrank in the second quarter of 2008, leaving Asia's largest economy teetering on the brink of recession, analysts said.
But the downturn is expected to be relatively short and shallow, and Japan may yet escape a technical recession, which is defined as two or more consecutive quarters of economic contraction, they added.
GDP probably shrank by about 0.6 per cent in the three months to June compared with the previous quarter, and at an annualised rate of 2.4 per cent, according to average market forecasts.
The last time the Japanese economy contracted was in the second quarter of 2007.
The two drivers of Japan's economic recovery-exports and business investment-have both lost steam, while inflation has accelerated to a decade-high, threatening to dampen already tepid consumer spending.
Japan's government said last week the country's longest economic recovery in postwar times appears to have come to an end.
Industrial output in the April-June quarter fell 0.7 per cent from the previous three months, a second consecutive quarterly decline, the government reported last month.
There is also expected to be a hangover from the brisk 4.0 per cent annualised GDP growth seen in the first quarter, when consumer spending was boosted by an extra day in February because of the leap year.
Soaring oil and food prices are also prompting consumers to tighten the purse strings.
"Household purchasing power is declining, mainly due to rising consumer prices," said Kyohei Morita, chief Japan economist at Barclays Capital.
He said economic growth was expected to turn barely positive again in the third quarter of 2008, although there was a risk of a second straight negative quarter if the global economy fares worse than expected.
The weakening labour market is also expected to have weighed on consumer spending in the second quarter. Wage growth remains sluggish and the unemployment rate hit a near two-year high in June.
But the downturn is expected to be relatively short and shallow, and Japan may yet escape a technical recession, which is defined as two or more consecutive quarters of economic contraction, they added.
GDP probably shrank by about 0.6 per cent in the three months to June compared with the previous quarter, and at an annualised rate of 2.4 per cent, according to average market forecasts.
The last time the Japanese economy contracted was in the second quarter of 2007.
The two drivers of Japan's economic recovery-exports and business investment-have both lost steam, while inflation has accelerated to a decade-high, threatening to dampen already tepid consumer spending.
Japan's government said last week the country's longest economic recovery in postwar times appears to have come to an end.
Industrial output in the April-June quarter fell 0.7 per cent from the previous three months, a second consecutive quarterly decline, the government reported last month.
There is also expected to be a hangover from the brisk 4.0 per cent annualised GDP growth seen in the first quarter, when consumer spending was boosted by an extra day in February because of the leap year.
Soaring oil and food prices are also prompting consumers to tighten the purse strings.
"Household purchasing power is declining, mainly due to rising consumer prices," said Kyohei Morita, chief Japan economist at Barclays Capital.
He said economic growth was expected to turn barely positive again in the third quarter of 2008, although there was a risk of a second straight negative quarter if the global economy fares worse than expected.
The weakening labour market is also expected to have weighed on consumer spending in the second quarter. Wage growth remains sluggish and the unemployment rate hit a near two-year high in June.