The economy of Japan was shrinking in the second quarter of 2015

The economy of Japan was shrinking in the second quarter of 2015

Japan’s economy contracted in the second quarter as overseas demand for Japanese goods slumped and households spent less, raising the possibility the government will act to bolster an anemic recovery

Japan’s gross domestic product shrank 1.6 % on an annualized basis in the April-June quarter, according to data released on August 17, 2015 by the Cabinet Office.

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Speaking shortly after the figures were released, Economy Minister Akira Amari said the contraction is likely a temporary one, pointing to strong sales of air conditioners in July and August.

“The government is not considering immediately implementing extra stimulus measures,” he told reporters.

Exports acted as the biggest drag on Japan’s economy during the quarter, falling a worse-than-expected 16.5 % on an annualized basis. Exports to China were especially weak, reflecting a slowdown in the world’s second-biggest economy. Japanese car exports to China fell more than 30 % on a dollar basis in the first half of this year, according to Japan External Trade Organisation.

The export slowdown had knock-on effects on the domestic economy, reducing overtime for workers and wages, government officials said. According to the GDP data, employee compensation declined 0.2 % on quarter after adjustment for inflation, after a 0.6 % gain in the first quarter.

Private consumption, which accounts for more than half of economic output in Japan, fell an annualized 3.0 % from the previous quarter. In addition to sluggish wage growth, poor weather and low temperatures in June hurt spending on air conditioners and summer clothes.

Japan’s weak Yen also raised the prices for many food items—such as ketchup, mayonnaise and curry sauce—prompting households to tighten their purse strings. Economists have said households have spent less as wage increases failed to keep up with prices after the national sales tax rose to 8 % from 5 % in April 2014.

www.wsj.com


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