TOKYO (AFP) - Japan's economy, the second largest ion the world, has entered its first recession in seven years as the global financial crisis batters exports and business investment, official data showed Monday. Japan joins Germany and Italy on the list of major economies that are officially in recession, dispite emergency steps by world powers to try to shield the global economy from months of turmoil on financial markets.
The Japanese economy unexpectedly contracted by 0.1 percent in the three months to September, after shrinking 0.9 percent in the second quarter of the year, according to figures from the Cabinet office. Global oil prices fell below $56 a barrel yesterdayas news that Japan fell into a recession highlighted investor fears of a global economic slowdown that will hurt crude demand. light sweet crude for December delivery was down $1.11 to $55.93 a barrel on the New York Mercentile Exchange. Meanwhile, the US economy is expected to contract at a faster pace in the fourth quarter, extending the decline into early 2009 as high unemployment crimps consumer spending, a survey showed.
The National Association of Business Economics' poll of 50 professional forecasters released on Monday found that real gross domestic product is expected to fall 2.6 percent in the first three months of 2009.
Preliminary government estimates showed GDP contracted 0.3 percent in the third quarter. The results of the survey, which was conducted between Oct. 28 and Nov. 7 indicated growing pessimism among forecasters.
"Business economists became decidedly more negative on the economic outlook for the next several quarters as a result of the intensification of credit market stresses and evidenceof spillover to the real economy," said NABE president Chris Varvares.
"Credit conditions continue to be tenuous. Despite the hefty liquidity injections by the Fed and the Treasury, the majority of NABE panelist believe that tight credit conditions will continue." Troubles in the US housing sector, emanating from the extension of loans top homeowners with poor credit history, have engulfed the broader economy, resulting in rising job losses and tight access to credit.
It is the first time since the third quarter of 2001 that Japan has entered a recession, which is usually defined as two or more consecutive quarters of negative economic growth. Gross domestic product (GDP) contracted at an annualized rate of 0.4 percent.
Analyst forecast, on average, had been for modest growth of 0.1 percent quarter-on-quarter. Tokyo's Nikkei stock index fell 1.3 percent in early trade. Business investment slumped 1.7 percent in the third quarter while exports were worse than expected, as the financial crisis triggeres by a US housing slump squeezed other major economies. "Japan was dragged down by the weakness in the global economy," said Kyohei Morita, Chief Japan economist at Barclays Capital, who expects the recession to last for four quarters in total.
Although Japan has not suffered financial turmoil on the same scale as the United States or Europe, its trade-dependent economy remains highly vulnerable to global downturns. "Japan is as export-driven as ever. So as long as exports are slowing due to the weakness of the global economy, we cannot escape," said Morita.
After suffering a series of on-off recession in the 1990s, Japan had been slowly recovering on the back of brisk exports and business investment. Corporate profits, however, are now sliding as exports suffer from the global slowdown, prompting companies to slash investment in new equipment and factories, which had been a key driver of economic growth.
This will bring something good to our country. One is the oil prices fall. This is a good news for everybody, not only for the people who have a car, also for the people who have different businesses. This is because the oil is the main product of all products. So if oil prices fall, everything will follow. The down side of this is that our economy will be affected by the investors from Japan. Some of them might leave the country and it's not good for us. Another is the GDP will fall by 2.6 percent. One of the reasons that will triger this is the investors leaving the country. I think what initiated Japan's economy be in recession is because of the number one economy, the US. Japan's economy is the second largest that's why it will really affect not only our economy but also other countries' economy.