Japan’s economy shrinks in Q3

Japan’s economy contracted between July and September, official data showed on Monday, reversing two previous quarters of growth and underscoring fears that its post-disaster recovery has stalled. Factory output in the world’s third-largest economy has slowed and Japan recorded its worst September trade figures in more than 30 years as weakness in Europe, a strong yen and a territorial dispute with China hit exports. The Cabinet Office said the economy of Japan, hammered by last year’s quake-tsunami disaster, shrank 0.9 per cent in the September quarter from the previous three months, a result largely in line with market expectations. On an annualised basis - which shows how the quarterly data would look if it were maintained for a full year - the economy contracted 3.5 per cent, it said, as exports slipped and demand among Japanese consumers also slowed. While the annualised figure beat market expectations, it was the sharpest rate of contraction since the twin disasters in March last year paralysed growth. The government has taken a series of steps to spur Japan’s lumbering recovery, including offering incentives for fuel-efficient vehicle purchases and measures to rebuild the northern region hit by the tsunami. However, those auto subsidies have now expired. Also, demand for Japanese cars has plunged in China, the world’s biggest vehicle market, amid a consumer boycott that followed Tokyo’s nationalisation in mid-September of an East China Sea island chain claimed by both Japan and its huge neighbour. “Deterioration in external demand will likely continue through the October-December period as the negative impact from China is expected to remain,” RBS Securities chief Japan economist Junko Nishioka told Dow Jones Newswires. Nishioka added that the economy was unlikely to show growth again “until the April-June period at the earliest, since the negative effects from China are expected to remain until around mid-December and as the global economy is likely to hit a bottom in October-December.”