Japan’s recession deeper than initially estimated

Japan's recession was deeper than initially estimated as company investment unexpectedly shrank, a blow to Prime Minister Shinzo Abe as he campaigns for re- election on his economic credentials.

The economy shrank an annualised 1.9 per cent in the July- to- September period from the previous quarter, weaker than the 1.6 per cent contraction reported in preliminary data.

Weaker-than-expected business investment sapped the world’s third-biggest economy, compounding damage from a slump in consumer spending after a sales-tax rise in April. With the main opposition party caught unprepared, Abe is on-track to win the December 14 election, even as a decline in the yen cuts into people’s spending power.

“Today’s report shows a pretty bleak picture of Japan’s economy,” said Taro Saito, director of economic research at NLI Research Institute in Tokyo. “We are going to see a recovery but only a gradual one. The weakening yen should provide a boost to manufacturers and those benefits will penetrate through a wide range of industries.”

The economy will grow an annualized 1.9 per cent this quarter, according to the median estimate in a separate survey before today’s data. Weakening Yen The Topix index of stocks was little changed at 10.35 am in Tokyo, and the currency was little changed at 121.49 per dollar, after earlier touching a seven-year low.

Economists raised their forecasts for GDP earlier this month after data showed companies increasing investment in the July-to September period.

Bloomberg