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Business

Japan’s economy contracts 1.4 pct

TNE-DF_2016-02-16_15-1
2 years ago

Japan’s economy shrank more than expected in the final quarter of 2015.

BY ELAINE KURTENBACH

The Associated Press

TOKYO – Japan’s economy contracted at a worse than expected 1.4 percent annual pace last quarter as Prime Minister Shinzo Abe’s lavish stimulus policies failed to counter anemic consumer demand and sluggish exports.

The preliminary data shows the world’s third-largest economy stumbling again after a 1.3 percent expansion in the July-September quarter. The economy shrank 0.4 percent in the October-December quarter from the previous quarter. Despite the lackluster report, Tokyo’s main share index, the Nikkei 225, vaulted 7.1 percent to 16,017.94 helped by a weakening in the Japanese yen, hopes of more stimulus and Friday’s rally on Wall Street.

The latest contraction, the second in 2015, adds to worries that Abe’s strategy for reviving the economy through inflation fueled by massive monetary easing is failing. The slowdown in China, one of Japan’s biggest export markets, has been a further hindrance.

Japanese officials have expressed concern over recent market gyrations. The expectation in Tokyo is that a meeting of finance ministers of leading industrial nations next week in Shanghai might help restore some balance to markets that have been out of kilter since China began tweaking its foreign exchange policies in August.

Japan’s central bank has already resorted to imposing negative interest rates on some bank deposits it holds to help spur more lending, though cash-rich companies appear generally uninterested in borrowing.

Growth also has been stunted by slow increases in wages, which leave households less inclined to spend. Companies are still drawing down excess capacity built up during decades of fast growth, and have held back on domestic investments, viewing their aging home market as less attractive than other faster growing economies in Southeast Asia and elsewhere.

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