Japan’s Economy Shrinks 1.8%

Japan’s economy shrank in the third quarter faster than the government initially estimated, after businesses cut spending and slashed inventories in anticipation of a prolonged recession.
TradingEconomics.com, Bloomberg.com 12/9/2008 5:39:04 AM

Gross domestic product contracted at an annual 1.8 percent pace in the three months ended Sept. 30, the Cabinet Office said today in Tokyo, more than the 0.4 percent reported last month. Economists surveyed by Bloomberg predicted a 0.9 percent decline.

Japan’s first recession since 2001 is deepening as companies including Canon Inc. and Toyota Motor Corp. cut production, jobs and spending. The central bank’s Tankan survey next week will probably show sentiment among large manufacturers fell the most in 34 years, economists predict.

The Tankan index of confidence among big manufacturers will plunge to minus 23 points in December from minus 3 points three months earlier, according to the median estimate of 22 economists surveyed by Bloomberg News. The Bank of Japan will release the quarterly survey on Dec. 15.

From the second quarter, the economy shrank 0.5 percent, more than the 0.1 percent initially reported. Economists expected a 0.2 percent contraction.

Business spending slid 2 percent from the second quarter, more than the 1.7 percent drop reported last month. The revision reflected Finance Ministry figures last week that showed capital spending fell for a sixth quarter.

Canon, which is predicting its first full-year profit drop since 2000, said last month it will delay construction of a 100 billion yen ($1.1 billion) printer-cartridge factory in Oita Prefecture, southwestern Japan, as global demand slows. Toyota may lower its operating profit forecast because of weaker sales and the stronger yen, the Yomiuri newspaper reported today, without citing anyone.

The government said for a fifth month today that the economy is deteriorating” after the coincident index fell to 97.6 in October, the worst description the government can use to describe underlying conditions. It was the second-biggest drop in the measure on record.

Inventories accounted for 0.2 percentage point of the contraction, the biggest drag on the revised figures, as companies reduced stockpiles to avoid a glut should demand continue to fall, said Seiji Adachi, a senior economist at Deutsche Securities Inc. in Tokyo. Companies last month said they planned to cut production at the fastest pace in 35 years.

Japan’s Economy Shrinks 1.8%