TOKYO (AFP) – Japan’s economy contracted more than initially thought in the July-September quarter, revised official data revealed Monday, showing the world’s third largest economy sank deeper into recession.
The economy shrank 0.5 per cent quarter-on-quarter, worse than the 0.4 per cent estimated in initial data released three weeks ago, the Cabinet Office said.
The reading was much worse than the median forecast of a 0.1 per cent quarterly shrinkage in a survey by the Nikkei economic daily.
The drop came after a 1.7 per cent contraction in the April-June quarter, meeting a common definition of a recession as two consecutive quarters of negative growth.
On an annualised rate, the economy shrank 1.9 per cent in the third quarter against the initially-estimated fall of 1.6 per cent.
Prime Minister Shinzo Abe over the past two years has pressed ahead with a pro-spending growth bid, dubbed “Abenomics”, which boosted stock prices and pushed the yen down.
Where it had been credited with success up until the effects of a sales tax rise in April this year, Monday’s revised data showed the economy in fact contracted 0.4 per cent in the last quarter of 2013.
It expanded 1.4 per cent in January-March on shoppers’ last-minute buying binge before the tax rise.
Japan’s VAT rate rose from 5.0 per cent to 8.0 per cent on April 1, hitting consumers.
Private consumption picked up only 0.4 per cent after plunging 5.1 per cent in the April-June period, the latest data showed.
Private residential investment dived 6.8 per cent while private-sector corporate capital spending fell 0.4 per cent.
But Marcel Thieliant, Japan economist at Capital Economics, said the economy could return to growth in October-December.
Companies’ inventory adjustment was a large drag and overstated the weakness of the economy as some monthly data was encouraging, he said.
“The upshot is that the economy likely returned to growth this quarter,” he said in a note.
Separate data from the finance ministry showed Japan posted an 833.4 billion yen surplus in October on its current account, reversing a deficit of 154.3 billion yen thanks to a weaker yen and lower oil prices.
The current account is the broadest measure of the country’s trade with the rest of the world.
Income jumped with higher gains from equity and other direct investment, as well as from investment in financial items, partly inflated by a lower yen.