Japan’s economy shrinks for 2nd straight quarter
Thursday, May 19, 2011
TOKYO (AP) — Japan’s economy contracted sharply in the first quarter and headed toward recession, taking a big blow from the earthquake and tsunami that devastated the northeast coast in March.
Real gross domestic product — a measure of the value of all goods and services produced domestically — shrank at an annualized rate of 3.7 percent in the January-March period, the Cabinet Office said Thursday.
The result marks the second straight quarter that the world’s No. 3 economy has lost steam and undershoots an annualized 2.3 percent fall forecast in a Kyodo News agency survey.
There is no fixed definition of recession. Some economists say two consecutive quarters of contraction indicate recession, while others consider the depth of economic decline as well as other indicators like unemployment.
The March 11 earthquake and tsunami left more than 24,000 people dead or missing, and wiped out entire towns in the hardest-hit areas. It damaged factories in the region, causing severe shortages of parts and components for manufacturers across Japan, especially automakers.
A crippled nuclear power plant caused widespread power shortages that added to the headaches faced by businesses and households.
As a result, Japan’s factory production and consumer spending both fell the most on record in March. Companies are reporting lower earnings and diminished outlooks for the rest of the fiscal year.
Toyota Motor Corp., Japan’s biggest automaker, said last week that its quarterly profit tumbled more than 75 percent because of parts shortages after the tsunami. As of May, the crisis cost the company production of 550,000 vehicles in Japan and another 350,000 overseas.
Toyota is expected to lose its spot as the world’s top-selling automaker to General Motors Co. this year.
Even before the disaster, Japan’s economy was struggling. The country lost its place as the world’s No. 2 economy to China last year. It faced a slew of problems including years of deflation, a rapidly aging and shrinking population, and ballooning public debt.
Japanese companies increasingly relied on exports to drive growth and offset the persistently lackluster demand at home.
The first-quarter figure translates to a 0.9 percent fall from the previous three-month period, the Cabinet Office said.
Consumer spending, which accounts for some 60 percent of GDP, declined 0.6 percent. Capital investments by companies retreated 0.9 percent from the October-December quarter.