Japan’s economy is again in recession, according to government data released Monday, despite a vigorous push by the country’s prime minister, Shinzo Abe.
Despite Abe’s bold economic policies, a program dubbed “Abenomics,” the economy shrank 0.8% over the previous year in the third quarter (July – September), a decline driven by weak business investment and inventory numbers.
Because that follows a 0.7% drop in the second quarter, it qualifies as a technical recession: consecutive periods of economic slowdown.
The news could be significant beyond Japan’s borders: the country’s economy is the third largest in the world, behind those of the United States and China.
“Abenomics” has included government spending and monetary stimulus, along with attempts to reform the Japanese economy. The goal was to spark a “virtuous cycle” in which those proactive government measures helped businesses and workers.
But instead, growth has slowed, as has wage growth. Inflation remains low, behind the pace Japan’s central bank would prefer.
In the wake of the news, Tokyo-based economist Atsushi Takeda, of Itochu Corp., said that the government’s “report shows the increasing risk that Japan’s economy will continue its lackluster performance.”
He added that business investment was “becoming a bigger concern” as well: “Even though their plans are solid, companies aren’t confident about the resilience of economy at home and abroad.”
The Bank of Japan does not seem fazed by the report, with Bloomberg reporting that officials at the central bank said last week that they are still expecting improved inflation numbers regardless of what the GDP figures turn out to be.