Tokyo, Japan (4E) – Japan’s Cabinet Office on Monday reported that the economy slid into contraction for the first time in five quarters as gross domestic product fell 0.9 per cent in the third quarter of the year compared to the previous three quarters.
The preliminary reading for gross domestic product (GDP) is in line with estimates, although capital expenditure fell at a faster pace than expected. To cope with a strong yen and competitive markets, consumer electronics giants Sony and Panasonic have significantly reduced spending plans.
The GDP declined 3.5 per cent on an annualized basis, which is slightly higher than the projected 3.4 per cent contraction following growth of 3.7 per cent in the previous quarter.
The result will add more pressure for the Bank of Japan (BoJ) to implement monetary stimulus to help spur the economy. For the second straight month, the BoJ eased policy in October to help counter declining exports brought by the global economic slowdown and a strong yen.
In the three months through September, external demand contributed 0.7 percentage points although private consumption, which accounts for 60 per cent of the economy, fell 0.6 per cent.
Japan’s territorial dispute with China in the East China Sea led to boycott of Japanese products in the world’s second-biggest economy, resulting to weakening exports particularly for auto makers.