Japan economy shrinks at record pace

Japan's economy contracted at the fastest pace since 1955 as exports plunged, companies slashed production and families spent less.



Japan's real gross domestic product, or the total value of the nation's goods and services, shrank at an annual pace of 15.2 per cent in the January-March period, the government said today.

The drop was the steepest since Japan began compiling GDP statistics more than five decades ago. It also marks the fourth straight quarter of decline after the GDP fell a revised 14.4 per cent in the October-December period.

Economists surveyed by The Associated Press had expected a 15.8 per cent contraction on average.

"Weakness in the corporate sector is gradually spreading to households," Prime Minister Taro Aso told lawmakers in a parliamentary budget hearing. "This is a very serious situation, so we need to respond appropriately."

On a quarterly basis, GDP fell 4.0 per cent from the previous three-month period, according to the Cabinet Office's preliminary data.

Japan's first quarter results were markedly worse than other major economies, outpacing the euro zone's 2.5 per cent quarterly decline and a 1.6 per cent contraction in the U.S.

The world's second biggest economy had relied heavily on the rest of the world to buy its cars and gadgets to drive economic growth. Like its Asian neighbors, it has been pummeled by the unprecedented collapse in global demand triggered last year by the U.S. financial crisis.

Japan's exports plummeted a record 26 per cent in the first quarter from the fourth quarter, the government said.

In response, major exporters such as Toyota Motor Corp. and Sony Corp. have moved quickly to adjust by reducing shifts, suspending factory lines and announcing thousands of job cuts over the past few months. Japan's jobless rate jumped to 4.8 per cent in March, the highest in more than four years.

Capital expenditure — business investment in factories and equipment — fell 10.4 per cent from the previous quarter, while consumer spending slipped 1.1 per cent.

Unlike previous downturns, consumption has weakened much more than income, said Richard Jerram, chief economist at Macquarie Securities in Tokyo.

"The savings rate has gone up and that has worsened the severity of the recession," he said. "That is something which is novel about the last six months. It seems that the public has basically panicked about job security to an extent that hasn't happened in previous cycles."

Recent signs, however, suggest that the worst may have passed.

The decline in exports is slowing, and with companies aggressively trimming inventories, factories are beginning to boost production. Economists say that efforts by both the public and private sectors are also starting to pay off.

The government is trying to spark a turnaround with massive public spending. Its newest $150 billion stimulus package includes incentives for consumers to buy environmentally friendly appliances and cars, as well as help for the unemployed and small businesses.

Tetsufumi Yamakawa, chief Japan economist at Goldman Sachs, predicts GDP will turn positive this quarter and then accelerate to 3 per cent growth in the July-September period, helped by rebounding demand from China as well as the government's stimulus steps.

But it remains unclear whether any recovery can be sustained beyond the end of the year. Yamakawa warns that the "risk remains high for a slowdown" in the first half of 2010 as the impact of policy measures tapers off.

For the last fiscal period through March 31, Japan's GDP contracted by a record 3.5 per cent from the previous year, the Cabinet Office said. It expects the economy to shrink 3.3 per cent this fiscal year.

Start your day with The Independent, sign up for daily news emails
Sport
The Queen and the letter sent to Charlie
football
Arts and Entertainment
Eurovision Song Contest 2015
EurovisionGoogle marks the 2015 show
News
Two lesbians hold hands at a gay pride parade.
peopleIrish journalist shares moving story on day of referendum
Arts and Entertainment
<p>
<b>Kathryn Williams</b>
</p>
<p>
When I was supporting Ray La Montagne I was six months pregnant. He had been touring for a year and he was exhausted and full of the cold. I was feeling motherly, so I would leave presents for him and his band: Tunnock's Tea Cakes, cold remedies and proper tea. Ray seemed painfully shy. He hardly spoke, hardly looked at you in the face. I felt like a dick speaking to him, but said "hi" every day. </p>
<p>
He was being courted by the same record company who had signed me and subsequently let me go, and I wanted him to know that there were people around who didn't want anything from him. At the Shepherds Bush Empire in London, on the last night of the tour, Ray stopped in his set to thank me for doing the support. He said I was a really good songwriter and people should buy my stuff. I was taken aback and felt emotionally overwhelmed. Later that year, just before I had my boy Louis, I was l asleep in bed with Radio 4 on when Louis moved around in my belly and woke me up. Ray was doing a session on the World Service. </p>
<p>
I really believe that Louis recognised the music from the tour, and when I gave birth to him at home I played Ray's record as something that he would recognise to come into the world with. </p>
booksKathryn Williams explores the works and influences of Sylvia Plath
News
Liz Kendall played a key role in the introduction of the smoking ban
newsLiz Kendall: profile
Life and Style
techPatent specifies 'anthropomorphic device' to control media devices
Voices
The PM proposed 'commonsense restrictions' on migrant benefits
voicesAndrew Grice: Prime Minister can talk 'one nation Conservatism' but putting it into action will be tougher
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine
Letterman's final Late Show: Laughter, but no tears, as David takes his bow after 33 years

Laughter, but no tears, as Letterman takes his bow after 33 years

Veteran talkshow host steps down to plaudits from four presidents
Ivor Novello Awards 2015: Hozier wins with anti-Catholic song 'Take Me To Church' as John Whittingdale leads praise for Black Sabbath

Hozier's 'blasphemous' song takes Novello award

Singer joins Ed Sheeran and Clean Bandit in celebration of the best in British and Irish music
Tequila gold rush: The spirit has gone from a cheap shot to a multi-billion pound product

Join the tequila gold rush

The spirit has gone from a cheap shot to a multi-billion pound product
12 best statement wallpapers

12 best statement wallpapers

Make an impact and transform a room with a conversation-starting pattern
Paul Scholes column: Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?

Paul Scholes column

Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?