Japan May Have Entered a Recessionary Phase, BOJ Members Warn

on Nov 2, 2012

Japan, the third largest economy in the world, may be in recession, board members of the Bank of Japan (BOJ) warned. In addition, some BOJ members noted that the country’s economy might not start recovering until after the beginning of 2013, given the slowdown in overseas economies, weighing on Japan’s exports.

**October 4-5 BOJ Minutes**
On 2 November 2012, Japan’s central bank released the minutes from its policy meeting which took place October 4-5, and although the BOJ kept policy on hold at that particular meeting, the minutes showed that some members did not rule out the possibility “that the economy would be acknowledged retroactively to have entered a recessionary phase.”

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Bloomberg reports that economists at Citigroup (NYSE:C) and Nomura Securities have revised down their forecasts for Japan’s gross domestic product for the third quarter after industrial production fell the most in September since the earthquake in 2011. Japan’s third quarter GDP figures are expected to be released on November 12. Japan’s finance minister, Koriki Jojima, also noted that the economy was showing signs of a slowdown, and pledged to work with the central bank in overcoming deflation.

**Recovery to be Delayed**
The BOJ minutes also indicated that some board members did not see Japan’s economy returning “to a moderate recovery path” until after the beginning of 2013, given the “risk that a further slowing down of overseas economies would exert downward pressure on the Japanese economy.”
!m[The Country’s Recovery Likely To Be Delayed Due To Slowdown In Overseas Economies](/uploads/story/704/thumbs/pic1_inline.png)Bloomberg quotes Nomura Securities as forecasting an annualised 5.1 percent contraction of Japan’s economy in the three months to September, followed by a 0.3 percent contraction in the next quarter.

**BOJ May Remain under Monetary Easing Pressure**
In any case, the BOJ, which expanded its asset-buying programme on October 30, is likely to remain under pressure to intervene further. Bloomberg quotes a first-of-its-kind joint statement by the finance minister Koriki Jojima, the economy minister Seiji Maehara and the BOJ Governor Masaaki Shirakawa, with the statement showing that the government “strongly” expected powerful easing until deflation was overcome.
Mr Maehara, who has recently been quoted as urging the central bank to intervene, also attended the policy meeting on October 5, the first cabinet minister to do so since 2003. The minutes, however, did not specify whether the minister made any comments.


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