JAPAN’S RECESSION

JAPAN FALLS INTO RECESSION AFTER ECONOMY SHRINKS 3.7%

Keiko Ujikane

Bloomberg, May 19, 2011

Japan’s economy shrank more than estimated in the first quarter after the March 11 earthquake and tsunami disrupted production and prompted consumers to cut back spending, sending the nation to its third recession in a decade.

Gross domestic product contracted an annualized 3.7 percent in the three months through March, following a revised 3 percent drop in the previous quarter, the Cabinet Office said today in Tokyo. The median forecast of 23 economists surveyed by Bloomberg News was for a 1.9 percent drop.

The March disaster hit an economy already weighed down by years of deflation and subdued consumer spending, and slashed profits at companies including Toyota Motor Corp. as factories were shut. The economy may further contract in the second quarter before rebounding later this year as reconstruction spending kicks in.

“The contraction in the second quarter will probably be even bigger as consumer spending and exports slump,” said Norio Miyagawa, senior economist at Mizuho Securities Research and Consulting Co. in Tokyo. “The economy will likely return to growth from the third quarter once the supply-chain disruption eases and reconstruction work begins.”

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