BLOODBATH: Japan’s Economy Contracts 1.6% in Q3, Misses Growth Target of +2.1%

Japanese Bloodbath

Japan’s economy is in technical recession after gross domestic product (GDP) shrank in the third quarter, defying expectations for growth.

The world’s third-largest economy contracted an annualized 1.6 percent in the July-September quarter, data showed on Monday, compared with a Reuters forecast for a 2.1 percent gain. The economy contracted a revised 7.1 percent in the second quarter.

On a quarter-on-quarter basis, the economy shrank 0.4 percent in the third quarter.

Private consumption, which accounts for about 60 percent of the economy, rose a smaller than expected 0.4 percent from the previous quarter, a sign that an increase in Japan’s sales tax to 8 percent from 5 percent in April continued to take a toll.

Dollar-yen jumped to new seven-year highs on the news, hitting 116.72, levels not seen since October 2007. Japan’s Nikkei 225 opened down 0.8 percent.

“The first estimate of the GDP is usually very off the reality, especially we’re lacking the import component from the corporate statistics to see the capex, and today’s number in the capex was a big drag. So, we have to wait to see what the second estimate is but first impression of the result today is shockingly weak for the economy,” Yoshito Sakakibara, executive director of investment research at JP Morgan.

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