World Economy

Japan Slips Back Into Recession

Japan Slips Back Into RecessionJapan Slips Back Into Recession

Japan on Friday published a string of mostly weak data, the first major figures since news that the world’s number three economy had slipped back into recession.

A key inflation gauge showed prices fell in October from a year ago, while spending by households also dropped in a double blow for Prime Minister Shinzo Abe’s high-profile growth blitz, dubbed Abenomics, NewsNow reported.

The weak figures came despite signs of a tight labor market, with the headline unemployment rate at a two-decade low of 3.1%, down from 3.4% in September.

But even the jobless numbers highlight a growing red flag for the economy–the rise of part-time work at lower wages.

“Employment is rising, but those jobs are mostly part-time,” said Dai-ichi Life Research Institute’s chief economist Yoshiki Shinke.

“The supply/demand balance for stable, permanent positions is not firm. As a result, we are seeing more employment in low-wage jobs.” By comparison, both UK and US unemployment are currently pretty low by post-crisis standards, but rates are still considerably higher than Japan’s. In October, the UK’s came in at 5.4%, and the US is at 5%.

It’s popular to bash Japan’s economy, particularly because of its lack of growth—but a significant part of that is down to the fact that it’s an ageing and shrinking population. On a per-capita basis, people aren’t worse off.

Earlier this month, official figures showed that Japan’s gross domestic product shrank 0.2% in the July-September period, or an annualized contraction of 0.8%, marking the second straight quarterly decline.

In response to the recent weakness, Abe on Friday ordered his government to draft an extra stimulus budget.

The economy dipped into a brief recession last year after consumers tightened their belts following an increase in Japan’s consumption tax, which dealt a blow to signs that Abe’s bid to spur the once-stellar economy was working.

That downturn spurred the Bank of Japan to sharply increase its already massive bond-buying program–a cornerstone of Abenomics–effectively printing money to boost lending.

While Tokyo’s efforts sharply weakened the yen–beefing up firms’ profits–and stoked a stock market rally, its impact on an economy beset by years of deflation has been less convincing.

Meanwhile, consumer prices excluding food and energy, or “core” inflation, rose by just 0.7%, the lowest since July and considerably less than the Bank of Japan’s 2% target. Japan has been mired in low inflation or deflation for decades now, which hasn’t helped its significant debt problem.

Overall household spending also came in considerably weaker than expected, slumping 2.4% year-on-year.