The Japanese economy shrank 0.9 percent in real terms in the first quarter from the preceding quarter, or at an annualized pace of 3.7 percent, the government said, as the country’s production and economic activity sank more rapidly than projected.
It was the second consecutive quarterly GDP decline for Japan, which recently fell behind China to rank as the world’s third-largest economy, meeting terms for a full recession. The Japanese economy had contracted 0.8 percent in the October-December quarter from the preceding quarter.
The Cabinet Office said the devastating earthquake and tsunami that hit the northeastern part of Japan on March 11 have seriously damaged corporate and consumer sentiments toward spending.
Consumer spending, which accounts for nearly 60 percent of Japan’s GDP, fell 0.6 percent sequentially in the January-March quarter, or at an annualized pace of 2.2 percent. Corporate capital investment also slipped 0.9 percent, an annualized rate of 3.5 percent.
Many analysts expect the Japanese economy to shrink again in the April-June quarter.
In nominal terms, or before adjustment for price changes, GDP shrank 1.3 percent in the January-March period.
In the whole of fiscal 2010, which ended on March 31, the Japanese economy expanded 2.3 percent in real terms and 0.4 percent in nominal terms, marking the first growth in three years.
Economic and Fiscal Policy Minister Kaoru Yosano told reporters on Thursday that the economy may remain weak for awhile. But, he said, “The supply disruptions are being addressed. It will not be long before we see a recovery in (consumer) sentiment ... and a surge in (domestic) demand as a result of reconstruction work.”
Meanwhile, Japan’s industrial output fell at its fastest pace on record in March on a month-on-month basis, tumbling 15.5 percent from February, revised figures show.
According to the Ministry of Economy, Trade and Industry, the seasonally adjusted mining and manufacturing production index stood at 82.7 in March against 100 for the base year of 2005