Japan back in recession

Japan back in recession


A rise in consumer taxes in April has translated into Japan falling into recession, according to reports by the Financial Times.

Data for the quarter between July and September is showing that performance during the period was considerably worse than expected. Expectations of a 2.2% growth were shattered, seeing a 1.6% contraction instead.

As a result, it is now almost a certainty that Prime Minister Shinzo Abe will postpone any plans for further increases while appealing for a fresh mandate via a snap election.

The biggest contributor to this decline was the huge cut in firms’ inventories. On its own, this saw 0.6% shaved off of the headline gross domestic product figure. Had there been no change in the inventories, there would have been quarter-on-quarter growth of 0.2%.

Looking at data on household consumption and capital spending, it is clear that the tax-increase in April, from 5% to 8% have taken a toll. Since that implementation, Japan’s recovery has been “very, very slow”, said Kazuhiko Ogata, chief economist at Credit Agricole in Tokyo.

The latest declines come after a contraction of 7.3%, meaning that Japan is now back in a technical recession. This is the fourth since the Lehman crisis.

What a lot of people don’t realise is that the Bank of Japan Governor Kuruda has already placed huge amount of liquidity into the market place in anticipation of this . Looking forward I can see higher growth towards the end of the year , with the BOJ liquidity into the market place and also the Japanese Pension Fund divesting from JPY yen assets for more international asset we will see the effect of this at the end of this year .

 


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