The composite index of coincident economic indicators for September
dropped for the sixth straight month, indicating Japan's economy has likely
entered a recession, according to the Cabinet Office.
The coincident CI, which reflects
current economic conditions, stood at 91.2 compared with 100 for the base year
of 2005, down 2.3 points from the previous month, the office said in a
preliminary report released Tuesday.
In addition to declining exports
stemming from a slowdown in overseas economies, some indicators, such as
industrial output and shipments of durable goods, dropped due to sluggish
domestic auto sales following the end of a government subsidy program for
purchases of environmentally friendly vehicles.
The Cabinet Office revised
downward its basic assessment, saying the national economy has moved into a
recessionary phase and is likely in the first stages of an economic slowdown.
This was the first such
assessment made since May 2011, just after the Great East Japan Earthquake and
tsunami.
Concerning future prospects, the
Cabinet Office said it will be necessary to keep a close eye on the global
economic downturn and exports.
Some market observers suspect the
domestic economy entered a recessionary phase after peaking in March.
Sluggish exports cast dark clouds
The government will need to
closely analyse various data before officially stating the economy has entered
a recession. However, dark clouds are looming.
"It's fairly difficult to
judge whether the country has moved into an economic slump as we have to
comprehensively consider various indicators," said Seiji Maehara, state
minister for economic and fiscal policy.
The economy had been expanding
since bottoming out in March 2009.
However, to some economists,
there is no question that the economy is in trouble.
"The current economic
situation is clearly getting worse, it's not simply stagnant," said
Yoshiki Shinke, a senior economist at the Dai-Ichi Life Research Institute.
"I suspect the national economy peaked in March this year."
This is the first time the CI has
dropped for six straight months since a 10-month period of decline from June
2008 to March 2009, which included the so-called Lehman Shock in September
2008.
Declining exports caused by the
global economic slowdown, sluggish domestic auto sales and the detrimental
effects of soured relations with China over the Senkaku Islands have aggravated
the situation.
The government on Monday will
issue a preliminary report on the nation's seasonally adjusted real gross
domestic product for the July-September period, in which negative growth
estimates are expected for the first time in the last five quarters. Furthermore,
some observers believe negative GDP growth will continue into the next
October-December quarter.
The government has not abandoned
hope that the economy will recover if overseas economies improve along with the
beneficial effects of increased demand for reconstruction in areas hit by the
March 2011 disaster.
"There are signs the Chinese
economy has bottomed out, so the Japanese economy is expected to recover in a
relatively short time," said Yoko Takeda, senior economist at the
Mitsubishi Research Institute, Inc.
However, the leading index--a
yardstick for economic performance in the months ahead--was down 1.5 points at
91.7, the first drop in two months.
If exports continue to lag for
reasons such as ongoing tensions with China, it will cause further production
declines, which could have an adverse impact on employment. -- Hiroyuki Kato
Business Desk
Business & Investment Opportunities
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