Japan’s Economy Shrank in Q4 – Justification for Abenomics

Japan’s economy unexpectedly shrank last quarter as falling exports and a business investment slump outweighed improved consumption, highlighting the challenge facing Prime Minister Shinzo Abe as he seeks to end deflation.

Gross domestic product contracted an annualized 0.4 percent in the three months through December, following a revised 3.8 percent contraction in the previous quarter, the Cabinet Office said in Tokyo today. The median forecast of 32 economists surveyed by Bloomberg News was for 0.4 percent growth. In nominal terms, the economy shrank 0.4 percent on quarter.

The fourth-quarter contraction suggests a lag before Japan’s economy benefits from a weaker yen and rising stocks. Banks from Goldman Sachs Group Inc. to Nomura Holdings Inc. have raised their growth forecasts for this year on Abe’s plan to revive the economy through fiscal and monetary stimulus as Bank of Japan Governor Masaaki Shirakawa prepares to step down next month.


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