The Japanese economy shrank 0.6 percent in the October-December quarter from the preceding quarter and 2.3 percent year-over-year, as weak exports spurred the first contraction in two quarters.
The Japanese economy, as measured by gross domestic product, the total output of goods and services in a nation, expanded 1.7 percent in the July-September quarter from the preceding quarter, or at an annualized pace of 7.0 percent, the Cabinet Office said in a preliminary report on Monday.
The Cabinet Office attributed the negative growth in GDP in the October-December quarter to a slump in exports to the appreciation of the yen, a slowdown in the global economy and supply chain disruptions caused by flooding in Thailand.
Japan, the world’s third-largest economy after the United States and China, is heavily dependent on exports for growth. Japan posted its first annual trade deficit in 31 years in 2011.
Japan’s exports of goods and services fell 3.1 percent in the October-December period from the July-September period. Consumer spending, which accounts for nearly 60 percent of Japan’s GDP, edged up 0.3 percent in the October-December quarter on a quarter-on-quarter basis.
Corporate capital investment, another main engine of growth, also increased 1.9 percent on a quarter-on-quarter basis. But growth in domestic demand was not strong enough to offset a decline in external demand, the Cabinet Office said.
In nominal terms, or before adjustment for price change, the Japanese economy shrank 0.8 percent in the October-December period on a quarter-on-quarter basis, or at an annualized pace of 3.1 percent.
Many analysts expect, however, that the Japanese economy will get back on a moderate growth path thanks to demand related to reconstruction efforts from the devastating earthquake and tsunami that hit the northeastern part of the country on March 11.
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