Japan's economy contracted more than initially thought in the July-September quarter, revised official data revealed Monday, showing the world's third largest economy sank deeper into recession. The economy shrank 0.5 percent quarter-on-quarter, worse than the 0.4 percent estimated in initial data released three weeks ago, the Cabinet Office said.
The reading was much worse than the median forecast of a 0.1 percent quarterly shrinkage in a survey by the Nikkei economic daily. The drop came after a 1.7 percent contraction in the April-June quarter, meeting a common definition of a recession as two consecutive quarters of negative growth. On an annualised rate, the economy shrank 1.9 percent in the third quarter against the initially-estimated fall of 1.6 percent. Prime Minister Shinzo Abe over the past two years has pressed ahead with a pro-spending growth bid, dubbed "Abenomics", which boosted stock prices and pushed the yen down.
Where it had been credited with success up until the effects of a sales tax rise in April this year, Monday's revised data showed the economy in fact contracted 0.4 percent in the last quarter of 2013. It expanded 1.4 percent in January-March on shoppers' last-minute buying binge before the tax rise. Japan's VAT rate rose from 5.0 percent to 8.0 percent on April 1, hitting consumers.
Private consumption picked up only 0.4 percent after plunging 5.1 percent in the April-June period, the latest data showed. Private residential investment dived 6.8 percent while private-sector corporate capital spending fell 0.4 percent. But Marcel Thieliant, Japan economist at Capital Economics, said the economy could return to growth in October-December. Companies' inventory adjustment was a large drag and overstated the weakness of the economy as some monthly data was encouraging, he said. "The upshot is that the economy likely returned to growth this quarter," he said in a note. Separate data from the finance ministry showed Japan posted an 833.4 billion yen surplus in October on its current account, reversing a deficit of 154.3 billion yen thanks to a weaker yen and lower oil prices.