Struggling Japan narrowly avoids technical recession

TOKYO

Japan narrowly avoided a technical recession in the second half of 2023, data showed Monday, but economists said the number four economy's performance remains in the doldrums.

Gross domestic product inched up 0.1 percent between October and December from the previous three months, the cabinet office said.

This reversed an earlier preliminary estimate for a 0.1-percent contraction following negative growth of 0.8 percent in the third quarter.

Technical recession is generally defined as two successive quarters of falling GDP.

But the reading still fell short of 0.3-percent quarterly growth that economists had expected for the revision, according to a survey by Bloomberg News.

The change reflected upgraded corporate investment, estimated to have risen 2.0 percent compared with the original projection of a 0.1-percent contraction.

But Japan's consumption, both in private and government sectors, contracted further than the earlier estimate.

The latest report was "nothing to write home about," said Stefan Angrick, senior economist at Moody's.

"Business investment has underperformed over the past year. Consumption spending has fallen for three consecutive quarters. And output is still lower than in the second quarter of 2023," he said.

"In all, Japan's economy is doing poorly," he said.

The latest figures came as speculation swirls about when the Bank of Japan may finally end its negative interest rate policy.

This may come potentially as early as March 19 at the central bank's next meeting.

Japan has battled for decades stagnant growth and deflation, but economists say signs are increasing that prices may be rising enough for the BoJ to normalise its stance.

Markets down across Asia

Meanwhile Asian markets mostly fell yesterday after a forecast-busting jobs report dampened U.S. interest rate cut hopes, with attention now turning to the release of key inflation data this week.

However, analysts said that while the jobs figures were bigger than hoped, they would not likely cause policymakers to hold off lowering borrowing costs as unemployment ticked up to a two-year high.

The reading "didn't necessarily amount to an 'all-clear' signal for the Fed, but there also didn't appear to be anything in it that would derail its plan to cut rates", said Chris Larkin of E*Trade from Morgan Stanley.

And SPI Asset Management's Stephen Innes added that "the U.S. labour market seems to be in a comfortable zone - not too hot and not too cold".

"Reminiscent of Goldilocks's 'just right' porridge."

Traders are now factoring in three rate cuts this year, compared with six that were pencilled in three months ago.