Japan's economy is in recession, data suggests

November 07, 2012

By KEN SAKAKIBARA/ Staff Writer

Japan appears to have entered a recession for the first time in four years, as a key indicator of the current state of the economy fell for a sixth consecutive month, the government said.

The coincident index--a composite index measuring month-on-month changes in indicators such as industrial output and retail sales--dropped in September by 2.3 points to 91.2, the Cabinet Office said Nov. 6. A reference of 100 was set in 2005.

This preliminary figure represents a decline for the sixth consecutive month, causing the government to downgrade its economic assessment from "stationary" in the previous month to a "phase of downward change."

If the October index--to be released in December--shows another monthly fall, the government is expected to lower its assessment to "downturn," an effective recognition of a recession. Japan last fell into recession in February 2008.

Such an assessment will remain tentative because data is needed for 11 months before the government can officially declare a recession, a process that takes more than a year.

However, many private-sector economists have said they believe the economy reached a peak in spring and has since been in a recessionary phase.

The main factors are weak sales of cars and home appliances. The durable-goods shipment index has fallen for five months in a row.

Additionally, the industrial production index, which indicates manufacturing output, dropped for a third consecutive month, reflecting the slowdown in the global economy.

And a preliminary figure for gross domestic product in the July-September quarter, to be released by the Cabinet Office on Nov. 12, will likely further underscore the downturn.

Most economists expect to hear of Japan's first GDP contraction since the post-disaster period of April-June 2011.

"There are also the slowdown in China's economy and the problem of the 'fiscal cliff' in the United States," said Seiji Maehara, minister for economic and fiscal policy, addressing reporters on Nov. 6. He was referring to Washington's forthcoming deadline for cuts in government spending and simultaneous expiration of tax cuts.

"We will try to strengthen the footing, including with stimulus measures," he said.

By KEN SAKAKIBARA/ Staff Writer
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New vehicle sales in Japan fell 5.7 percent in October compared with a year earlier, the second straight monthly decline. (Asahi Shimbun file photo)

New vehicle sales in Japan fell 5.7 percent in October compared with a year earlier, the second straight monthly decline. (Asahi Shimbun file photo)

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  • New vehicle sales in Japan fell 5.7 percent in October compared with a year earlier, the second straight monthly decline. (Asahi Shimbun file photo)
  • The Asahi Shimbun

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