The rebound from the March 11 disasters was probably cut short in the fourth quarter as the impact of Europe’s crisis outweighed the support from reconstruction spending.
Gross domestic product probably shrank in October and November, pointing to a 0.1 percent contraction for the quarter, according to calculations by the Japan Center for Economic Research, an independent analysis group in Tokyo. JPMorgan Chase & Co. is among banks cutting projections for GDP in the period.
“It was a very tough quarter for the Japanese economy,” said Yuki Masujima, a senior economist at JCER who used to compile economic forecasts at the Bank of Japan.
“The biggest risk this year is the double hit from the European crisis — first from the strong yen that will make it harder for exporters to sell their products, then from the drop in real demand.”
A third contraction in four quarters would widen Japan’s gap with China, which overtook it as the world’s second-largest economy in 2010, and undermine a global recovery clouded by Europe’s failure to contain the debt crisis.
It also risks deepening public opposition to Prime Minister Yoshihiko Noda’s plan, approved by the Cabinet on Friday, to double the 5 percent consumption tax by 2015.
Lawmakers from the opposition, along with some ruling party members, have said a higher levy would undermine the fight against more than a decade of deflation.
Fourth-quarter GDP data are scheduled for release Feb. 13 by the Cabinet Office. Key economic indicators for December are due later this month. In November, industrial output slid 2.6 percent and exports tumbled 4.5 percent, missing economists’ forecasts and signaling weakness in the export-driven economy, which has failed to contribute to global growth.
The economy shrank 0.3 percent in October and 0.5 percent in November, according to estimates made by JCER, which tracks GDP on a monthly basis.
JPMorgan on Thursday lowered its forecast to an annualized 0.6 percent contraction for the fourth quarter, compared with a previous estimate of 0.5 percent growth.
It also said GDP will rise 1.3 percent this year, less than an earlier projection of 1.9 percent. GDP jumped at an annualized 5.6 percent in the three months through September.
“The weakening euro has had a big impact on Japan, especially on the industries exporting to Europe,” Finance Minister Jun Azumi said Friday. “I’d like this situation to be resolved as soon as possible.”