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Japan’s economy contracts for third straight quarter following weak demand

Thursday - Feb 14, 2013, 03:33pm (GMT+5.5)
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London - Japan’s economy contracted for the third straight quarter in the three months till the end of December, showing the challenges the new government is facing in reviving growth.

The economy shrank 0.1 percent compared with the previous three months, which is equivalent to an annualized dip of 0.4 percent in gross domestic product.

According to the BBC, Japan’s growth has been hurt by a drop in exports to key markets and subdued domestic consumption.

Shuji Tonouchi of Mitsubishi UFJ Morgan Stanley Securities in Tokyo said that the biggest reason for the decline in gross domestic product (GDP) is external demand was weak and domestic demand did not recover as quickly as we thought.

He added that the economy has contracted for three straight quarters, but the third quarter was the worst and fourth quarter data show the pace of decline is slowing.

Last month, it approved a fresh 10.3 trillion yen stimulus package in an attempt to spur a revival in the economy.

The package, which includes infrastructure spending, and incentives for businesses to boost investment, is estimated to boost Japan’s economy by two percent and create 600,000 jobs, the report said.

At the same time, Japan's central bank, the Bank of Japan (BOJ) has also doubled its inflation target to two percent.

Japan has been fighting deflation, or falling prices, for best part of the past decade, and this has hurt domestic demand as consumers tend to put off purchases in the hope of getting a cheaper and better deal later on.

The central bank has also expanded its asset purchase programme, which is to expected to pump billions of yen into the economy, the report said.

The Japanese currency has dipped more than 15 percent against the US dollar since November last year, it added.


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