Japan’s government downgraded its view of the economy for a fourth month, the longest streak since the global financial crisis as slumping exports and weak demand threaten to tip the country into a recession.
“The Japanese economy is showing weakness recently due to the deceleration of the world economy,” the Cabinet Office said in a report released in Tokyo today, as it cut its assessment of consumption, investment, corporate profits and the job market. “Attention should be paid to employment and income situations in the future, and the adverse effects of deflation on the economy.”
Prime Minister Yoshihiko Noda will today dissolve parliament for a general election on Dec. 16 that polls suggest he will lose. The Cabinet Office’s report underlines the challenges facing any new government after the economy shrank the most since the 2011 earthquake in the third quarter, and may boost the case for additional fiscal stimulus and central bank easing.
Japan is at risk of entering its third technical recession, defined as two straight quarters of contraction, since 2008. Gross domestic product may fall 0.4 percent in the this quarter, according to the median forecast in a Bloomberg survey of economists. Japanese recessions are officially defined by a government-charged panel that considers data beyond GDP figures.
In today’s report, the government cut its assessment of the job market for the first time in 17 months. Private consumption is “showing weakness” and capital expenditure is “growing weaker,” the government said.
Panasonic Corp., one of several Japanese electronics makers struggling to compete with Samsung Electronics Co. and Apple Inc., said Nov. 15 it would cut 8,000 jobs in the second half of this fiscal year.
Opinion surveys show that the Liberal Democratic Party could regain power in the December election, reinstating party leader Shinzo Abe, an advocate of more aggressive monetary policy, to the premiership he quit in 2007. Abe’s call yesterday for unlimited easing and a benchmark interest rate of zero or lower sent the yen to a six-month low against the dollar late yesterday in Tokyo.
The yen traded at 81.15 per dollar at 8:32 a.m. in Tokyo from 81.17 at the close yesterday, when it touched 81.46, the weakest since April 25. It has lost 2.1 percent this week.
The government said in today’s report that it had “strong” expectations that the Bank of Japan would continue its “powerful easing.”
The series of downgrades is the longest since the government lowered its economic view for five consecutive months between October 2008 and February 2009.