Date
22 January 2017
A woman takes a look at oranges on sale at a shop in Tokyo. Strong third-quarter capital spending helped Japan avoid a recession. Photo: AP
A woman takes a look at oranges on sale at a shop in Tokyo. Strong third-quarter capital spending helped Japan avoid a recession. Photo: AP

Japan escapes second recession of Abenomics era

Japan has avoided slipping into a second recession of the Abenomics era thanks to stronger than expected capital spending in the third quarter.

Gross domestic product grew 1 percent in the period from three months earlier, the Wall Street Journal reports, citing revised figures.

Previously, the government had estimated that the economy shrank 0.8 percent.

The upward revision allows the government of Prime Minister Shinzo Abe to say the economy is on a recovery track after a revised decline of 0.5 percent in the second quarter.

A recession is often defined as two consecutive quarters of contraction.

The initial estimate of negative third-quarter growth had given Japan the embarrassing distinction of having two recessions in as many years despite the large monetary and fiscal stimulus carried out by Abe’s government and the Bank of Japan in the past three years.

A main reason for the revision was business investment, which was initially estimated to have shrunk 5 percent in the quarter on an annualized basis.

The revision showed it increased 2.3 percent.

Despite the positive revision, the outlook for the economy looks murky, as Japan feels the pinch from the economic slowdown in China.

Japanese machinery makers have reported a drop in demand from smartphone makers in China and elsewhere.

Offsetting this is a strong inflow of Chinese tourists, who have helped lift the number of visitors to Japan to a record this year.

Department store operator J. Front Retailing Co., shopping mall operator Aeon Mall Co., electronics retailer Laox Co. and karaoke shop operator Shidax Corp. have all made investments in Japan recently to cater to Chinese tourists.

Abe is expected to release details as soon as next week of additional economic stimulus in the current fiscal year, which ends March 2016.

Officials have said the stimulus could be worth between 3 trillion yen and 3.5 trillion yen (US$24 billion to US$28 billion), or about 0.6 percent of GDP.

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