Japanese economy went into recession in Q3 2014, showed the latest data of the national statistical office in Tokyo. The news came a day before Prime Minister Shinzo Abe announced if and when it will call early general elections, which will be used as a vote of confidence by the ruling majority for the continuation of the ongoing large-scale reforms. At the same time the news led to a serious setback to Japan’s Nikkei 225 stock index, which slid 2.96% to 16,973 points. The Gross domestic product (GDP) of the country of the rising sun slid 0.4% quarterly and 1.6% annually in the period from July to September. Quarter earlier Japanese economy shrank by 7.1%, thus the two consecutive quarters of red sent the country into recession. The data are worse than expected by the markets. The consensus forecast was for the GDP growth of 0.5% quarterly and 2.2% annually.
According to the report, domestic demand fell by 0.5% during the quarter. The exports, which are the major factor in the growth of GDP, rose by 1.6% and imports – by 0.8%. Government increased the consumption tax on April 1 from 5% to 8% in an attempt to reduce the rising levels of government debt. Plans of the Office of Abe include new levy increase to 10 per cent since the beginning of October 2015.
The increasing speculation that Shinzo Abe is preparing to call early elections in December, in addition to the weak latest data from the country are another suspicious economic recovery in Japan.
Just two weeks ago Central Bank of Japan unexpectedly announced that increases the size of its program of monetary easing from 60-70 trillion JPY to 80 trillion JPY per year. To speed up inflation close to the 2% target by which according to the central bankers will avoid falling into a deflationary spiral new. However, the rising cost of living for the moment have only problems in Japan, as the deterioration of consumer purchasing power inhibits further demand.