World Economy

Japan’s GDP Shrank in Last Quarter

Japan’s GDP Shrank in Last QuarterJapan’s GDP Shrank in Last Quarter

Japan’s economy is expected to have contracted slightly more than initially estimated in the final quarter of 2015, and ominously the outlook held little cheer as domestic and external demand has remained stubbornly weak at the start of this year.

The world’s third-largest economy is forecast to have shrunk an annualized 1.5% in October-December last year, a Reuters poll of 21 analysts showed, slightly worse than the early estimate of a 1.4% contraction.

The quarter-on-quarter gross domestic product was seen down 0.4%, unchanged from the initial estimate.

“Consumer spending and external demand are weak, and an inventory adjustment has continued longer than expected,” said Hideaki Kikuchi, economist at Japan Research institute.

“But wages and employment remain firm, so at the moment I don’t expect that the economy will deteriorate significantly.”

Tellingly, few if any analysts are predicting a sure-footed recovery over the near term, especially in the face of a stuttering global economy, sharp slide in exports and weak growth in private consumption.

The collapse in commodity prices and deflationary pressures around the world have left many policy makers scratching their heads in search of fresh tools to stoke momentum.

The desperation was illustrated late in January when the Bank of Japan made a historic move to adopt negative interest rates in an effort to reach its ambitious 2% inflation goal.

Prime Minister Shinzo Abe will convene an advisory panel to discuss the global economy, energy and the financial sector and an extra budget for the coming fiscal year is also expected to be an agenda.

Analysts expect capital expenditure, a major component of GDP, to have slowed down to a 1.2% gain for the quarter from a 1.4% rise in the preliminary reading.

The Cabinet Office will release the revised Q4 GDP on March 8.

The current account balance, which also will be announced on Tuesday, is forecast at a surplus of 719 billion yen ($6.3 billion) in January, marking the 19th straight month of surpluses. That largely reflected a lower import bill led by sliding oil and other commodities rather than any real improvement in export receipts.

The corporate goods price index, which measures the price companies charge each other for goods and services, is seen falling 3.4 in February from a year ago, down for 11 the straight month.