Posted on: Wednesday, February 16, 2005
Japan slips into recession again
By Lily Nonomiya
Bloomberg News Service
TOKYO — Japan's economy unexpectedly fell into recession last year for the fourth time since 1991 as export growth faltered and consumer spending declined.
Gross domestic product contracted at an annual 0.5 percent pace in the quarter to Dec. 31, the Cabinet Office said in a report in Tokyo today. The median forecast of 27 economists surveyed by Bloomberg News was for 0.7 percent growth. Revised figures showed the economy shrank for three straight quarters.
Sony Corp. and Hoya Corp. are among companies that have cut profit forecasts because of slowing global demand for products including flat-panel displays and digital cameras. Companies are limiting wage increases, damping the consumer spending that makes up half of the world's second-largest economy.
"The headline is obviously Japan is in recession," said Richard Jerram, chief economist at Macquarie Securities Ltd. in Tokyo. "The main reason that things slowed down so much in the second half was exports, and I think that consumption was a little disappointing."
For all of 2004, the economy grew 2.6 percent in real terms from the previous year, the fastest pace since 1996. Japan's growth last year compares with the 4.4 percent expansion in the U.S. and a 2 percent increase in the economy of the dozen countries sharing the euro.
"The economy is basically recovering, but we're in an adjustment phase that's a little long," Economic and Fiscal Policy Minister Heizo Takenaka told reporters today. "Moderate deflation is continuing."
Japan's economy contracted at an annual pace of 1.1 percent in the third quarter and shrank 0.8 percent in the second. It grew at a 5.8 percent pace in the first quarter of last year.
Today's report signals a technical recession, defined as two consecutive quarters of negative quarter-on-quarter growth. Recessions in economies including Japan and the U.S. are officially declared by a committee that marks the recession and recovery phases of the economy by taking into account factors other than GDP figures.
A worldwide glut of computer chips used to build mobile phones and personal computers is taking a toll on earnings and sales of Japanese exporters.
Hoya Corp., the world's largest supplier of glass plates used in products such as Apple Computer Inc.'s iPod portable music player, said profit growth slowed in the three months ended Dec. 31 and may slump further this quarter.
Sony, the world's second-largest consumer electronics maker, on Jan. 20 slashed its operating profit forecast by 31 percent to $1.05 billion, citing falling prices of digital products including flat-screen televisions and DVD recorders.
Still, companies including semiconductor-maker Tokyo Electron Ltd. are predicting a rebound this year.
"The chip industry has gone into an adjustment period and that phase will probably see bottom sometime this summer," Terry Higashi, chairman of Tokyo Electron, said in a Monday interview.
Consumer spending fell 0.3 percent in the fourth quarter, today's report showed.
Consumers may cut back further as the government of Prime Minister Junichiro Koizumi prepares to raise taxes and cut spending in a bid to curb the world's largest public debt, economists said.
"Consumption really isn't going to be strong enough to help drive growth," said Eishi Yokoyama, an economist at AIG Global Investment Corp. in Tokyo.
Three tropical storms in the quarter depressed spending by keeping shoppers at home. October's Typhoon Tokage was the biggest to hit Japan in more than a decade.
