Steepest drop since 1974 oil shock.
Japan’s economy shrank at an annual 12.7 per cent pace last quarter, the most since the 1974 oil shock, as recessions in the US and Europe triggered a record drop in exports.
Gross domestic product fell for a third straight quarter in the three months ended on 31 December, the Cabinet Office said on Monday in Tokyo. The median estimate of 26 economists surveyed by Bloomberg News was for an 11.6 per cent contraction.
Exports plunged an unprecedented 13.9 per cent from the third quarter as demand for Corolla cars and Bravia televisions collapsed amid a slump that the Group of Seven nations said will persist for most of 2009. Toyota Motor Corp, Sony Corp and Hitachi Ltd — all of which forecast losses — are firing thousands of workers, heightening the risk a decline in household spending will prolong the recession.
“The economy is in terrible shape and the scary part is that we’re likely to see a similar drop this quarter,” said Seiji Adachi, a senior economist at Deutsche Securities Inc in Tokyo. “All we can do is wait for overseas demand to pick up.”
The Nikkei 225 Stock Average fell 0.4 per cent at the close in Tokyo, extending the year’s losses to 13 per cent. The yen rose to 91.59 per dollar from 91.76 on speculation Japan will refrain from taking measures to weaken the currency. The yen’s 18 per cent gain over the past year has compounded exporters’ woes by eroding the value of their overseas sales.
Worse Than US, Europe: The world’s second-largest economy shrank 3.3 per cent from the third quarter, Monday’s report showed. That compared with the US’s 1 per cent contraction and the euro-zone’s 1.5 per cent decline, which was the sharpest in at least 13 years.