Japan’s economy shrinks in second quarter, recession on the horizon

August 12, 2008 by · Leave a Comment
Filed under: Economic News 

Japan’s economy shrank in the second quarter, the government said Wednesday, as slowing exports and waning consumer demand pushed the world’s No. 2 economy to the brink of recession.

Japan’s gross domestic product, or the total value of the nation’s goods and services, dropped at an annual pace of 2.4 percent in the April-June period, a marked downturn from a 4.0 percent rise registered in the January-March period.

The new numbers — the first negative reading in four quarters — bolstered growing evidence that Japan’s six-year expansion was over.

On a quarterly basis, GDP contracted 0.6 percent, after a 0.8 percent increase in the January-March period, the Cabinet Office said. Private consumption, which accounts for more than half of inflation-adjusted GDP, dropped 0.5 percent from the previous quarter. Housing investment was down 3.4 percent.

Two main drivers of Japan’s six-year economic recovery — business investment and exports — also deteriorated. Corporate capital investment in factories and equipment fell 0.2 percent from the previous quarter, while overall exports of goods and services slid 2.3 percent.

The latest figures, which had been widely expected, followed a series of sluggish economic indicators.

The government’s monthly economic report for August released last week described the economy as “weakening.” Although the Cabinet Office refrained from using the term “recession,” it left out any reference to an economic “recovery” for the first time in more than six years.

Industrial production was down 2.2 percent in June from the previous month, and slowing demand overseas is battering Japanese exporters.

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