“Japan’s economy unexpectedly shrank last quarter as falling exports and a business investment slump outweighed improved consumption, bolstering Prime Minister Shinzo Abe’s case for more monetary stimulus to end deflation.
Gross domestic product contracted an annualized 0.4 percent, following a revised 3.8 percent fall in the previous quarter, the Cabinet Office said in Tokyo today. The median forecast of 32 economists surveyed by Bloomberg News was for 0.4 percent growth. Nominal GDP shrank 0.4 percent on quarter.
The prolonging of Japan’s recession into a third quarter shows that benefits from a weaker yen and rising stocks have yet to be felt. The lower house of parliament passed Abe’s fiscal stimulus package today, while Bank of Japan GovernorMasaaki Shirakawa and his colleagues raised their assessment for the economy and left monetary policy unchanged.
“These are pre-Abe numbers,” said Takuji Okubo, chief economist at Japan Macro Advisors who formerly worked at Goldman Sachs Group Inc. “He was only prime minister for about the last week of the quarter. We will see a fairly big pick up this year, led by exports recovering on the weaker yen.”
The yen snapped a two-day advance today after Kazumasa Iwata, a former BOJ deputy governor who is a possible candidate to replace Shirakawa, said in a statement ahead of a meeting with ruling party lawmakers that a level around 90-100 per dollar would be a return to equilibrium. The currency was 0.1 percent weaker at 93.52 as of 4:34 p.m. in Tokyo, while the Nikkei 225 Stock Average closed up 0.5 percent.
