The economy shrank a bit less than first estimated in the fourth quarter, but the revised data released by the government Thursday offer little good news and only underscore an increasingly grim picture.
Export demand has collapsed, corporate profits are sinking into losses, and job losses are accelerating nationwide amid the steepest slump since the end of World War II.
Analysts say the downturn — and the way companies are responding to it — have combined to create a new kind of recession that’s swifter and deeper than ever before.
“The Japanese economy was simply collapsing and nose-diving toward the end of last year,” said Kyohei Morita, chief economist at Barclays Capital in Tokyo.
Gross domestic product, or the total value of the nation’s goods and services, fell at a 12.1 percent annual rate in the October-December quarter, slightly better than the Cabinet Office’s preliminary reading of 12.7 percent.
The contraction is the severest since the oil crisis of 1974 and double the pace of the U.S. decline.
On a quarterly basis, GDP dropped 3.2 percent, lower than the initial 3.3 percent reading, due in part to an upward revision in inventories, the government said.
The economy has shrunk for three quarters straight and is almost certainly headed for another quarter of contraction. Like its neighbors, export-reliant Japan has been hobbled by the U.S. financial crisis, which quickly morphed into a credit crunch and recession that has wounded global demand for Japanese cars and gadgets.
Exports plummeted a record 13.8 percent in the fourth quarter from the third quarter, the government said. Capital expenditures — business investment in factories and equipment — fell 5.4 percent from the previous quarter, while government investment grew 0.1 percent.
Iconic exporters including Toyota Motor Corp. and Sony Corp. — both of which are forecasting big annual losses — have reduced shifts, suspended factory lines and announced thousands of job cuts over the past few months. Industrial production in Japan tumbled a record 10 percent in January.
Economists say they’ve never seen Japanese companies move so quickly to cut staff. But this has been facilitated by an increasing reliance on temporary contract workers who can be eliminated more easily than full-time employees.
“In past recessions, we typically ended up with excess employment, which resulted in excess production, which resulted in inventory,” said Morita of Barclays Capital. “Households have a big hardship under the current recession, but with them as the sacrifice of the economy, the adjustment has been much quicker than before.”
The unemployment rate eased a tad to 4.1 percent in January, but the figure doesn’t account for workers who have simply dropped out of the labor market altogether. So-called discouraged workers, who have stopped actively looking for a job, are counted in Japanese labor data as part of the “nonworking population” instead of the unemployed.
A recent report by the Health, Labor and Welfare Ministry estimated that nearly 158,000 “nonregular” employees in the manufacturing sector will have lost their jobs between October and March.
For all of 2008, the economy shrank a revised 0.6 percent — the first decline in nine years, according to the Cabinet Office.
Many forecasters also expect another year of contraction in 2009. Estimates of the severity of the slump this year range widely, with the International Monetary Fund forecasting a 2.6 percent contraction and JPMorgan tipping GDP to shrink 7.7 percent.
To revive the economy, the Diet passed a contentious ¥4.8 trillion stimulus plan in January that includes a cash payout that amounts to ¥12,000 per resident.
Prime Minister Taro Aso — still struggling with dismal approval ratings — championed the idea, saying it will stimulate sagging consumer spending.
The central bank, which lowered its key interest rate to 0.1 percent in December, has introduced various steps to thaw the corporate credit crunch, including buying commercial paper, corporate bonds and stocks from financial institutions.
But Masamichi Adachi, economist at JP Morgan Securities in Tokyo, predicts this quarter will be even worse.
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