Gross domestic product shrank at a record 14.2 percent annual pace in the three months ended March 31, less than the 15.2 percent reported last month, the Cabinet Office said today in Tokyo.
The decline may represent the low point for an economy forecast to expand this quarter as demand from China helps stabilize exports and leaner inventories allow manufacturers to increase output. Still, with factories sitting idle and profits falling, companies are slashing investment and jobs, casting doubt on whether the revival will last.
Fourth-quarter GDP was revised to a 13.5 percent decline from 14.4 percent, today’s report showed. That’s still the worst contraction since the government began keeping records in 1955.
Capital spending fell 8.9 percent compared with a preliminary 10.4 percent, while inventories shaved 0.2 percentage point from GDP, compared with an earlier estimate of 0.3 point. Exports fell 26 percent, unchanged from the initial reading.
The recession has shown signs of easing since then. Japan’s manufacturers have benefited from revived demand in China, where the government is spending $586 billion on roads, hospitals and housing. Exports and factory production increased in March and April on a month-on-month basis.
Japanese Prime Minister Taro Aso’s record stimulus spending that includes loan guarantees for smaller businesses, cash handouts to households and incentives for buying cars and appliances are starting to work.
Consumer confidence rose to a 10-month high in April. Sales of electronics are by up about 20 percent since the government last month introduced a program to encourage consumers to buy eco-friendly products, according to Tokyo-based researcher Gfk Marketing Service Japan Ltd. Tax breaks on energy-efficient vehicles helped Honda Motor Co. post higher sales in the last two months. Bankruptcies fell last month for the first time since last April.
Even as bright signs emerge, manufacturers are only using about half their productive capacity because of the collapse in global demand. Exports and production have fallen by more than a third from last year’s levels and managers are under pressure to cut jobs and delay investments, which could cause the economy to start shrinking again as the effects of the stimulus wanes.
A dearth of demand for Japan’s products and services has started to weigh on prices, sparking concern the economy may slip back into the kind of deflationary malaise that caused wages to fall by about 10 percent in the decade through 2005. Workers at the country’s biggest companies will have their summer bonuses cut by a record 19.4 percent this year, according to a survey by business-lobby Keidanren.