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Japan revises Q1 GDP, recession lingers on

(Agencies)
Updated: 2009-06-11 11:29

TOKYO -- Japan's economy shrank slightly less in the first quarter than initial estimates, but the contraction still marked a record for the world's second-biggest economy.

Gross domestic product, or the total value of the nation's goods and services, fell at an annual pace of 14.2 percent in the January-March period, according to revised government figures Thursday.

A man walks near a factory at Keihin industrial zone in Kawasaki, south of Tokyo June 10, 2009. [Agencies]

A preliminary report last month had said GDP shrank at an annualized rate of 15.2 percent.

The 1 percent improvement stems from less severe declines in capital expenditures, the government said.

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The revision, however, doesn't change the fact that the drop was the steepest since Japan began compiling GDP statistics more than five decades ago. The drop came as exports plunged, companies slashed production and families spent less. It also marks the fourth straight quarter of decline after the GDP fell a revised 13.5 percent in the October-December period.

Japan's first quarter results are markedly worse than those of other major economies, including an annualized 5.7 percent contraction in the US.

On a quarterly basis, GDP fell a revised 3.8 percent from the previous three-month period, the Cabinet Office said.

Japan had relied heavily on the rest of the world to buy its cars and gadgets to drive economic growth. Like its Asian neighbors, it has been pummeled by the unprecedented collapse in global demand triggered last year by the US financial crisis.

Japan's exports plummeted a record 26 percent in the first quarter from the fourth quarter, the government said, unchanged from its preliminary report.

In response, major exporters such as Toyota Motor Corp. and Sony Corp. have moved quickly to adjust by reducing shifts, suspending factory lines and announcing thousands of job cuts over the past few months. Japan's jobless rate jumped to 5 percent in April, the highest in six years.

Capital expenditure -- business investment in factories and equipment -- fell a revised 8.9 percent from the previous quarter, while consumer spending slipped 1.1 percent.

Analysts generally agree that Japan's economy probably hit bottom in the first quarter, and recent signs point to a GDP rebound in the April-June period. The decline in exports is slowing, and industrial production surged in April.

Japanese manufacturers in particular are benefiting from expanding demand from China. The impact of government stimulus measures, including cash handouts and consumer incentives to buy "green" products, are also starting to give the economy a boost.

Toyota said last month that it is revving up production of its hit Prius to meet better-than-expected demand for the latest version of the world's top-selling hybrid.

But data Wednesday on April machinery orders suggests that overall, companies remain cautious when it comes to spending.

Japan's core machinery orders, a closely watched indicator of corporate capital spending, fell 5.4 percent from March to 688.8 billion yen ($7.1 billion). The result marked the lowest value since April 1987 and suggests that corporate Japan waits to be convinced that a recovery is in sight.

Investors are more bullish. Japan's benchmark Nikkei 225 stock average jumped to a fresh eight-month high Wednesday, powered by climbing commodity prices and optimism that the global economy is poised for growth.

In trading Thursday, the index broke above the psychologically key 10,000 level for the first time since October 8. It then retreated slightly and was down 0.1 percent at 9,977.75 in late morning.