Japan’s GDP Shrinks 12.7%


Japan’s economy shrank at an annual 12.7 percent pace last quarter, the most since the 1974 oil shock, as recessions in the U.S. and Europe triggered a record drop in exports.

Gross domestic product fell for a third straight quarter in the three months ended Dec. 31, the Cabinet Office said today in Tokyo. The median estimate of 26 economists surveyed by Bloomberg News was for an 11.6 percent contraction.

Exports plunged an unprecedented 13.9 percent from the third quarter as demand for Corolla cars and Bravia televisions collapsed amid a slump that the Group of Seven nations said will persist for most of 2009. Toyota Motor Corp., Sony Corp. and Hitachi Ltd. -- all of which forecast losses -- are firing thousands of workers, heightening the risk a decline in household spending will prolong the recession.

The world’s second-largest economy shrank 3.3 percent from the third quarter, today’s report showed. That compared with the U.S.’s 1 percent contraction and the euro-zone’s 1.5 percent decline, which was the sharpest in at least 13 years.

Japan has been in a recession since November 2007, according to a government panel that dates the economic cycle. The Sept. 15 bankruptcy of Lehman Brothers Holdings Inc. worsened a credit crisis that erased more than $14 trillion from global equity markets and paralyzed world trade.

The Bank of Japan, which in December cut its key interest rate to 0.1 percent, is trying to get credit flowing by purchasing shares and corporate debt from lenders. It has little means to address what analysts say is the economy’s central problem: a lack of overseas demand.

Net exports -- the difference between exports and imports -- accounted for 3 percentage points of the 3.3 percent quarterly drop in GDP.

Japan has become more dependent on sales abroad for growth over the past decade. Overseas shipments make up 16 percent of the economy today compared with about 10 percent in 1999.

Domestic demand, which includes spending by households and companies, made up 0.3 percentage point of the contraction.

Capital investment fell 5.3 percent. Manufacturers cut production by a record 11.9 percent in the quarter, indicating they have little need to buy equipment as factories lay idle. Consumer spending, which accounts for more than half of the economy, dropped 0.4 percent, as exporters fired workers.

Panasonic Corp., Pioneer Corp., Nissan Motor Co. and NEC Corp. announced a combined 65,000 job cuts in the past month. The eliminations may have pushed the recession into a new phase” in which consumers become more defensive and spend less, according to Martin Schulz, a senior economist at Fujitsu Research Institute in Tokyo.

Sentiment among households is close to the lowest level in at least 26 years. The jobless rate surged to 4.4 percent in December from 3.9 percent, the biggest jump in four decades.

Without adjusting for inflation, Japan shrank 1.7 percent from the previous quarter, less than the 2.1 percent analysts estimated. The GDP deflator, a broad measure of price changes, rose 0.9 percent, the first increase in a decade.


TradingEconomics.com, Bloomberg
2/15/2009 8:35:00 PM