Japanese Prime Minister Yoshihiko Noda’s decision to employ the country’s first sales-tax rise for over ten years could come under fire now that statistics have shown the nation’s economy has contracted by a worrying amount.
In the third-quarter of this year Japan’s Gross Domestic Product dropped by an annualised 3.5 per cent, according to data compiled by the Cabinet Office. The economy shrank by 0.9 per cent on a quarterly basis.
Not since the devastating earthquake and tsunami hit Japan in the first quarter of 2011 has the nation’s GDP fallen by such a high figure.
The data release also showed the steepest decline in capital investment for three years, after it fell 3.2 per cent, and a 0.5 per cent drop in private consumption.
Depressed consumer spending and a significant reduction in exports to the US, Asia and Europe contributed to the disappointing result, which came in 0.1 per cent lower than forecast by economists. This development could serve as a challenge to Noda’s sales-tax rise plans.
A senior economist with Tokyo based BNP Paribas SA commented: ‘Today’s bad economic numbers deliver unpleasant news for Noda. It will take a while for Japan to get back to a sound recovery, considering a modest pick-up in the global economy at best and the country’s damaged relationship with China.’
A survey conducted by Bloomberg news agency is predicting a further decline in the fourth quarter, specifically an annual pace decline of 0.4 per cent. If this proves accurate it would take Japan dangerously close to its third technical recession in four years.
After the statistics were revealed Noda stated: ‘the GDP figures were grim’ and promised to approach his government’s economic policy with a ‘sense of urgency’.
The Bank of Japan expanded its asset purchase programme towards the close of October and may add further stimulus when it meets on the 19th and 20th of December.
As of 10:32
The Pound to Euro exchange rate is currently trading at 1.2508
The Pound to US Dollar exchange rate is currently trading at 1.5903
The Pound to Australian Dollar exchange rate is currently trading at 1.5238
The Euro to US Dollar exchange rate is currently trading at 1.2710
The Euro to Pound exchange rate is currently trading at 0.7992
Comments are closed.