Japan’s economy slipped into recession for the second time since Prime Minister Shinzo Abe came to power nearly three years ago, data showed Monday, dealing a fresh blow to his drive to kick-start weak growth and end years of deflation.
Abe has staked his reputation on a policy blitz of fiscal spending, aggressive monetary policy easing and structural reforms — dubbed Abenomics — aimed at reviving the world’s third-largest economy. Japan’s economy, once Asia’s biggest, has been overtaken by giant neighbour China in size, while it struggles with a challenging demographic outlook that is expected to see its population shrink by tens of millions in the coming decades.
Still, it boasts some of the world’s biggest companies, including in the automotive sector and banks, and its domestic technology plays a key role in a wide array of global industries, including vehicles, electronics and high-end machinery.
The Cabinet Office said on Monday that gross domestic product (GDP) shrank 0.2 per cent in the July-September period, or an annualised contraction of 0.8 per cent, marking the second straight quarterly decline—considered a technical recession.
It was also below the 0.1 per cent forecast in a Bloomberg News survey.
The economy contracted in 2014 after consumers tightened their belts following an increase in the country’s consumption tax, which put a dent in a nascent recovery. That downturn spurred the Bank of Japan to sharply increase its already massive bond-buying programme, effectively printing money to spur lending.
However, the government slightly improved its April-June data to a 0.2 per cent contraction from 0.3 per cent shrinkage previously estimated. The latest figures will turn attention back to the BoJ ahead of a policy meeting this week to see whether it adds to its 80 trillion yen ($653 billion) annual stimulus programme.