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Japan May Have Entered Recessionary Phase, Some BOJ Members Say

Japan’s economy, the world’s third biggest, may have entered a “recessionary phase,” according to some Bank of Japan board members.

The possibility “could not be ruled out,” a few policy makers said at an Oct. 4-5 policy meeting, according to minutes released in Tokyo today. A Cabinet Office official at the meeting said the government and the central bank need to “deepen their dialogues,” the record showed.

Economists at Nomura Securities Co. and Citigroup Inc. revised down their forecasts for Japan’s third-quarter gross domestic product after industrial production fell the steepest in September since last year’s earthquake. The Bank of Japan may remain under pressure to add monetary stimulus after it this week expanded an asset-purchase fund by 11 trillion yen ($137 billion).

Finance Minister Koriki Jojima said in parliament today that the economy shows signs of weakening and pledged to work with the BOJ to overcome the nation’s deflationary trend.

Nomura Securities said on Oct. 30 it expects the Japanese economy to contract an annualized 5.1 percent in the three months to September, followed by a 0.3 percent shrinkage in the next quarter. Citigroup and Credit Suisse Group AG are also among those forecasting two quarters of contraction through year-end.

The Cabinet Office will release third-quarter GDP figures on Nov. 12.

Economy Minister Seiji Maehara attended the BOJ meeting on Oct. 5, the first cabinet minister to do so since 2003. The minutes don’t specify which government official made comments. At the meeting, the BOJ board decided to hold off from more easing after adding to stimulus in September.

The joint statement that Maehara and Jojima issued with BOJ Governor Masaaki Shirakawa after the central bank’s meeting on Oct. 30 was the first of its type, Maehara said. The government “strongly expects” powerful easing until deflation is overcome, according to the statement.

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