Greater Patchogue News – February 16, 2016 – Separately, data earlier showed that Japan’s gross domestic product contracted by an annualized 1.4% in the three months to December, worse than expectations for a contraction of 1.2%, following a revised 1.3% expansion in the second quarter.
Private consumption, which accounts for about 60 percent of the country’s GDP, recorded a real 0.8-percent decline from the previous quarter as unusual weather blew sales for winter clothing, the government said.
Monday’s economic data did contain glimmers of hope, however: capital expenditure rose 1.4% – far higher than the 0.2% forecast, while falling prices for Japan’s oil imports helped net exports grow by 0.1%. The Bank of Japan already cut interest rates to below zero last month to get banks to lend more.
The latest contraction, the second in 2015, adds to worries that Abe’s strategy for reviving the economy through inflation fueled by massive monetary easing is failing. That compares with the 0.8 percent median estimate of economists in a Bloomberg survey.
TOKYO-Japan’s economy shrank again in the fourth quarter, the latest confirmation that Prime Minister Shinzo Abe’s growth program is sputtering.
A lack of growth in wages is a big reason for the weak trend in Japan, said Taro Saito, the director of economic research the NLI Research Institute in Tokyo.
This has had serious repercussions for Japan, with the yen strengthening, despite the Bank of Japan embarking on a move into negative interest rate territory. “There’s no clear driver to support Japan’s economy”.
Growth also has been stunted by slow increases in wages, which leave households less inclined to spend.
The weak growth figures will put a renewed spotlight on whether Abe will follow through with another sales tax hike next year, after a similar move in April 2014 threw the brakes on a nascent economic recovery.
Japan has hoped that deflation could be overcome with sustainable growth to prompt rising incomes, consumption and investment. The Shanghai Composite Index in mainland China lost 0.6 percent to finish at 2,746.20 after reopening following the Lunar New Year holiday.
Private consumption, however, has dropped in three of the last five quarters.
The 225-issue Nikkei Stock Average skyrocketed 1,069.97 points, or 7.16 percent, higher from Friday to 16,022.58.
Economists have highlighted market volatility recently as pushing up the value of the yen against its major counterparts, as fears of a global economic downturn, or particular episodes of concern, such as financial institutions’ woes in Europe and the USA, see investors flee from riskier assets like stocks and into safe havens like precious metals or the yen.
All this was before the rout in global markets this year.