Japanese economy contracts; economists, officials predict a recession

Japan's exports for the quarter — a period between July and September —plummeted 5.0 percent, the steepest drop since immediately after the March 2011 earthquake and tsunami.

"In part, this may have been due to the anti-Japan demonstrations in China and the subsequent boycott of Japanese goods," Barclays Economic Research wrote in a note after the data was released.

Economists predict that Japan's economy will shrink again in the next quarter, leading to a technical recession. If Japan does go into recession, it would be its third since 2008, according to Bloomberg.

"Judging from recent economic indicators, the possibility cannot be ruled out that the Japanese economy is already in a recessionary phase," Japan's economy minister, Seiji Maehara, told reporters.

A potential but modest recovery in 2013 could come if the world's biggest economies — the United States and China — continue to rebound. "Going forward, developments in Japan's economy will basically depend on those in overseas economies," said Masaaki Shirakawa, the governor of Japan's central bank.

Still, Japan faces a series of factors preventing the broader turnaround of an economy that has been stagnant for two decades. The short-term boost from disaster reconstruction appears to have waned. The country has an aging population, a shrinking workforce, and its debt-to-GDP ratio is the highest among industrialized nations. That limits the ways that Japan can use additional fiscal stimulus to reboot its economy.

Japan also faces a fiscal cliff of its own, with a political standoff so far preventing parliament from passing debt-covering legislation for this year's budget.

The numbers released Monday could spur the Bank of Japan to lower its GDP forecast of 1.5 percent growth for the fiscal year, which started April 1. To hit that target, Barclays said in its note, Japan's economy would need to grow 3.9 percent in each of the last quarters — "virtually impossible, in our view."

Prime Minister Yoshihiko Noda told parliament on Monday that the data was "severe," and that Japan would "respond with a sense of crisis."

Source: http://www.news.theusalinks.com/2012/11/12/japanese-economy-contracts-economists-officials-predict-a-recession/