Japan falls into recession in the third quarter

Japan entered recession in the third quarter, data showed on Monday, less than a week before the elections, presented as a referendum on the government’s economic policy, the so-called ‘abenomics’.

The Gross Domestic Product (GDP) in Japan contracted by 0.5% between July and September compared to the previous quarter, said Monday the government had to revise downwards previous estimates (-0.4%). The forecasts of analysts, who forecast a bleak scenario (-0.1%), have been overtaken again by reality.

After a contraction of 1.7% between April and June (as updated data), falling into recession in the third world economy for the fifth time since 2000 is confirmed. In annual rate, GDP fell 6.7%, and 1.9% in the last two quarters. The reason is to be found on the rise, in April, three points, from 5% to 8% – VAT. During this period, household consumption grew 0.4%. Private investment shrank more than expected, both with respect to the purchase of housing (-6.8%) and non-residential business investment (-0.4%), which have sharply reduced their stocks , dropping GDP (-0.6 points). Public demand has also been revised down (+ 0.5%), while exports were unchanged (+ 1.3%).

These data come at a bad time for the Japanese Prime Minister Shinzo Abe, who on Sunday expects to receive the support of voters to its economic program, consisting of quantitative easing, strong public investment and structural reforms.

“In two years, the ‘abenomics’ has paid off, even if it failed to engage a virtuous circle,” said Deputy Secretary General of the Government, Hiroshige Seko. “We have to stand here or go? That’s what I asked people,” he added.

Abe, economic recipe has contributed to lower employment rate and curb deflation and the depreciation of the yen.

Opposition slams “failure” of abenomics

Faced with mounting criticism of small businesses and consumers, penalized by the high cost of imports -due to the depreciation of the yen, the prime minister replied that a strong currency is even more destructive.

Abe and his supporters, the recession has sole cause the rise in consumption taxes, hence the decision to postpone until April 2017 the second ascent. The horizon should be resolved quickly. As the effects of this measure are clarified, “the economy is likely to grow again in the fourth quarter,” agrees Capital Economics. SMBC Nikko Securities also anticipates “strong rebound”.

Meanwhile, the opposition has already buried the ‘abenomics’. “The result appears quite different from complimentary outline painting the prime minister,” said Tetsuro Fukuyama, head of the Democratic Party of Japan (DPJ center left).

“The failure of the ‘abenomics’ has become clear to everyone,” he said, expecting a penalty at the polls, not only on economic policy but against Abe and pronuclear diplomatic strategy, but not likely to be the case, according to political scientists predict a landslide victory of the Liberal Democratic Party (LDP) of Shinzo Abe to an opposition divided into pieces. According to the polls, the ruling party could win more than 300 of the 475 seats in the lower house, which would give him four more years in power.

To the astonishment of the people, they just do not understand why this onerous consultation two years ahead of time, observers fear a record abstention.