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Japan Re-Enters Recession In Q3

japan GDP 111615

Japan's economy entered a technical recession in the third quarter largely due to weak corporate investment, strengthening calls for additional monetary stimulus.

Gross domestic product declined by an annualized 0.8 percent in the third quarter, data published by the Cabinet Office revealed Monday. Technical recession is defined as two consecutive quarters of contraction in GDP.

The economy had contracted 0.7 percent in the second quarter, which was revised from previously estimated 1.2 percent fall. The rate of decline in the third quarter GDP was bigger than the expected 0.2 percent fall.

Nonetheless, Economy Minister Akira Amari today said he expects the economy to recover in the fourth quarter. Prime Minister Shinzo Abe aims to expand nominal GDP by 20 percent by 2020.

At its October-end meeting, the Bank of Japan downgraded its growth forecast for the current fiscal to 1.2 percent from 1.7 percent.

The second quarter of contraction underlines the downside risks to the BoJ's growth forecasts, Marcel Thieliant at Capital Economics, said.

With rising slack dampening price pressures, more stimulus will eventually be needed. The January meeting is the most likely venue for its announcement, the economist said.

The BoJ is set to announce the outcome of its next monetary board meeting on November 19.

The expenditure-side breakdown of GDP showed that private consumption, which accounts for around 60 percent of GDP, climbed 2.1 percent, adding 0.3 percentage point to growth.

On the other hand, business investment declined 5 percent, subtracting 0.2 percentage point from growth. Likewise, inventories reduced growth by 0.5 percentage points.

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