Huge news: Japan’s economy tipped back into technical recession last quarter, possibly prompting Prime Minister Shinzo Abe to call snap elections early. The Financial Times:
Monday’s preliminary data for the period between July and September was far worse than markets expected, showing a shrinkage of 1.6 per cent quarter-on-quarter on an annualised basis against analysts’ expectations for growth of 2.2 per cent, as businesses cut back spending.The big swing factor that caught out economists was a big drop in companies’ inventories, which shaved off 0.6 percentage points from the headline gross domestic product number. If inventories had been flat, quarter-on-quarter growth would have been 0.2 per cent.
This is not just an economic story or a Japanese politics story. Abe’s quest to revitalize the Japanese economy is part of his geopolitical goal of reviving Japan’s place as a great power in the Pacific. Japan is the linchpin of the Pacific coalition that, with backing from the United States, has been working to keep China from pushing the region’s smaller countries around.If the Abe project fails economically in Japan, the fragile new power balance in the Pacific will come under threat.