Japan’s recession worse than expected but a return to growth likely

Japan’s economy shrank at even faster pace than previously expected according to a second estimate of its GDP figures.

On a quarter-by-quarter basis Japan’s GDP declined 0.5 per cent in the third quarter of this year according to the Cabinet Office. This is one basis point more Cabinet Office’s first estimate of a 0.4 per cent contraction and two basis points off the preliminary estimate a 0.2 per cent quarter-on quarter decline.

On an annualised rate, the economy shrank 1.9 per cent in the third quarter against the initially-estimated fall of 1.6 per cent.

According to Capital Economics’ Japan economist Marcel Thieliant, a large drag from inventories in the last quarter have overstated the weakness of the economy.

“In the meantime, the monthly data have been more encouraging,” he says. “The upshot is that the economy likely returned to growth this quarter.”