Japan’s Economy Shrinks

The Japanese economy contracted during the third quarter. The rate of contraction was at 3.5% at an annualized figure. That ended up sparking concerns that the shrinkage would cause a sustained slowdown across the region. The GDP figures for Japan Monday were much worse than economists had expected.

This was Japan’s biggest contraction in its economy since the earthquake and tsunami that devastated the country in 2011. The rate for this latest quarter was worse than the contraction that took place during the second quarter from April through June. Economists said that a scenario for a recession in the country is becoming more likely.

One expert said Japan’s economy might even be in a recession. The economy in Japan, mainly its many exports made a quick recovery following the natural disasters of 2011, but a recent diplomatic clash with China over the ownership of two islands has created a new problem. That problem has caused Chinese consumers to become reluctant in buying imports from Japan, especially automobiles.

Sales of Japanese autos in China fell dramatically during last month in China. The largest trade partner for Japan is China with nearly 20% of all Japanese exports sold to China.

Japan’s Central Bank is making an effort to increase the flow of money in the economy. The Bank announced at the end of last month it would be increasing its bond buying from 80 billion yen to an average of 91 billion yen or about a $13.8 billion dollar difference.

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