Japan’s economy contracted at an annualized rate of 1.6 percent during April–June of this year, in what is looking like a blow to Prime Minister Shinzo Abe’s economic reform policy, known as Abenomics. As exports fall and consumer spending contracts (at least in part due to the effects that China’s current economic woes are having on its Asian neighbors), one analyst told the AP that these economic trends could make another stimulus more likely:
The contraction in gross domestic product (GDP) compared with a median market forecast of a 1.9 percent fall and followed a revised expansion of 4.5 percent in the first quarter, Cabinet Office data showed on Monday.
“If weak private consumption persists, that would be a further blow to Abe’s administration, which is facing falling support rates ahead of next year’s Upper House election,” said Hiromichi Shirakawa, chief Japan economist at Credit Suisse.
“This could raise chances of additional fiscal stimulus.”
For its part, the Abe government says it has no intention of putting together another stimulus package, but rather is encouraging firms to raise wages and increase capital expenditures. Thanks to the Chinese slump, however, any recovery in Japanese growth through September is expected to be minimal.
This quarter’s news shuts out the ray of light that last quarter’s 2.4 percent annualized growth rate provided, and it raises serious longterm questions about the prospects for Japan’s famously stagnant economy if China’s bubble is really bursting.