Wary Japanese consumers stash their cash
The world's third-largest economy is stuck in neutral, as wary Japanese consumers and corporations opt to hold on to their cash rather than spend it.
The latest data, released Tuesday, showed Japan's GDP contracted at a 1.1 per cent annualised pace in the last quarter in further evidence the economy is failing to gain traction despite unprecedented efforts by the central bank to spur more growth.
The revised figures compared with a 1.4 per cent expansion in the July-September quarter. They showed a modest improvement over the previous estimate of a 1.4 per cent contraction in October-December.
A monthly consumer survey for February, meanwhile, showed families were likely to cut spending further following the recent spate of turmoil in financial markets.
But more recent data suggest Japan's growth has remained tepid in early 2016, raising the likelihood of further government moves to help boost growth. That could include further moves by the Bank of Japan to encourage lending, extra government spending and possibly a second delay in a sales tax hike scheduled for April 2017.
"Companies have not been as downbeat about production in the month ahead since the 2008 recession. What's more, consumer spending fell further in January as indicated by dips in 'core' household spending and retail sales," Marcel Thieliant of Capital Economics said in a commentary.
Prime Minister Shinzo Abe faces pressure both at home and abroad to deliver faster results three years after launching a recovery strategy, dubbed 'Abenomics' that helped boost share prices and corporate profits but has not rekindled growth as quickly as hoped.
Abe will be hosting a summit of the Group of Seven industrial nations in central Japan's Mie prefecture in May. His economy minister, Nobuteru Ishihara, said Tuesday that ahead of that meeting, the government would convene several seminars with top economic experts to study the global economy and how to cope with slowing growth.
Japan's economy grew 0.5 per cent in 2015 after flatlining in 2014
In quarterly terms, the economy shrank 0.3 per cent in the last quarter compared with a preliminary estimate of a 0.4 per cent contraction.
Business investment climbed 1.5 per cent, helping to offset a decline in spending on housing. Overall public investment dropped 3.4 per cent.
Economists are divided on whether the Bank of Japan, which holds a policy meeting next week, will expand asset purchases that are pumping trillions of yen (hundreds of billions of dollars) into the economy to help combat deflation.