Japan's economy sank deeper into recession in the third quarter than initially estimated, reinforcing fears that the world's second-largest economy is facing its longest contraction ever.
The export-driven economy now looks likely to keep shrinking at least until the first quarter of next year -which would mark a postwar-record four straight quarters of decline - as leading manufacturers slash output to deal with a slump in global demand.
"Japan will need to endure hardship next year," Economics Minister Kaoru Yosano said. "Policy efforts are necessary to keep the economy from deteriorating sharply."
Tumbling support rates are increasing pressure on Prime Minister Taro Aso to put together an emergency spending package, which one newspaper said could total $216 billion, or around 3.6 per cent of gross domestic product (GDP).
Major Japanese exporters such as Toyota and Sony are facing a dire outlook, with the euro zone and the United States also in recession, and growth slowing in big emerging markets such as China.
Japan's economy contracted 0.5 per cent in July-September, far more than the preliminary figure of a 0.1 per cent decrease, revised GDP figures showed today.
"The revision was bigger than expected. Given further weakness in exports and capital spending since October, the economy's contraction will deepen in the fourth quarter," said Tatsushi Shikano, senior economist at Mitsubishi UFJ Securities.
Some analysts speculate the Bank of Japan will cut interest rates again by March, the end of the business year, after lowering its key rate to 0.30 per cent from 0.50 per cent in October. However, derivative contracts are pricing in a less than 30 per cent chance of another 0.20 percentage point cut by then.
Faced with gloomy economic data and disgruntled voters, Mr Aso has called for a new spending package to ease the pain of a worsening job market. Support for his government has dived, with polls showing many Japanese want an early election even as Mr Aso tries to work on resuscitating the economy.
The Yomiuri daily reported that the government was considering compiling a package that would include outlays worth 15 trillion yen to 20 trillion yen ($161 billion-$216 billion) to be spent over the next three years.
Reuters