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Japan economy contracts by 12%

12 March 2009 08:17 (UTC +04:00)

Bakuâ€“ APA-Economics. Japan’s economy shrank less than first thought in the fourth quarter of 2008 but still logged its worst performance in almost 35 years, according to new government figures released on Thursday, AFP reported.
The world’s second-largest economy contracted 3.2 percent in the three months to December or 12.1 percent on an annualised basis, as the global downturn choked off demand for cars, high-tech goods and other exports.
The revised figure was slightly better than the initial estimate of a 12.7 percent drop but it was still the worst quarter since early 1974. The government says the crisis is the worst since World War II.
Japan was once seen as relatively immune to the financial crisis, but its economy is now shrinking much faster than many others, including the United States.
Recent data point to another sharp contraction in the first quarter of 2009. Japan logged a record current account deficit in January as exports almost halved from a year earlier, while factory output has plummeted.
The country’s recovery from the 1990s recession was driven almost entirely by brisk exports. But the global downturn has caused demand for Japanese goods to dry up, prompting companies to shed tens of thousands of jobs.
Japan’s heavy dependence on overseas markets means that its economy cannot recover until the global situation improves, analysts said.
Japan’s banks escaped the worst of the subprime loan crisis but its manufacturers have been badly hurt because their products, such as cars and televisions, often drop off consumer shopping lists when times are tough.
Corporate icons such as Sony and Toyota are heading for big losses in the current financial year because of weak demand and the strength of the yen, which is bad for export earnings.
Prime Minister Taro Aso said last week there was "no bottom in sight" for Asia’s biggest economy.
Tokyo’s Nikkei stock index dropped to the lowest level in more than 26 years earlier this week. The Nikkei slipped 0.6 percent in early trade Thursday.
Japan has announced a series of stimulus packages to spur growth, though huge public debt -- a leftover from efforts to spend its way out of the 1990s recession -- has left it with limited ammunition to fight the crisis.
The central bank has slashed interest rates to 0.1 percent and taken steps to spur lending, such as purchases of bonds, as it seeks new ways to try to unblock credit markets.