Japan economy contracts as global slowdown hits exports

Japan's economy contracted in the July to September quarter, as a global economic slowdown and anti-Japan protests in China hurt its exports, while domestic consumption remained subdued.

Japan's economy contracted in the July to September quarter, as a global economic slowdown and anti-Japan protests in China hurt its exports, while domestic consumption remained subdued.

Gross domestic product (GDP) contracted 3.5 per cent from a year earlier.

Compared with the previous three months, the economy contracted 0.9 per cent.

The weak data is likely to put pressure on the government to boost stimulus measures to spur growth.

"There are risks from both domestic and external factors," said Tatsushi Shikano, senior economist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo.

"As such, the Bank of Japan (BOJ) will stand ready to ease monetary policy again, and it would not surprise me if the BOJ eased again by the end of this year."

Heading for recession?

Japan's economy, the world's third-largest, has been trying to recover from last year's earthquake and tsunami, which caused widespread destruction in the country.

However, its recovery has been hampered by a combination of factors

A slowdown in key markets, such as the US and eurozone has hurt demand for its exports, one of the biggest drivers of Japanese growth.

Slowing growth and anti-Japan protests in China - Japan's biggest trading partner - have further impacted its export sector.

To add to its woes, the debt crisis in the eurozone and weak recovery in the US have seen many investors flock to safe-haven assets such as the yen, resulting in the Japanese currency strengthening against the US dollar and the euro.

 

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