Japan's GDP shrinks in the fourth quarter

By Staff Writer

Feb 15, 2016 07:20 PM EST

The economy of Japan shrank during the fourth quarter of 2015 as a result of weak export and demand. The Japan economy shrank more than it was anticipated, adding to the chain of obstacles for an economic reform activity.

The final quarter witnessed an economic fall by 0.4% compared to the prior quarter, BBC said quoting an official data. This number is higher than the estimated figure of 0.3%. Poor local demand coupled with less investment in the housing sector subsidised to the economic slowdown in the nation.

The nation's economy tightened an annualized 1.4%, which is higher than the predicted figure of 1.2%. The revival economic policy of Prime Minister Shinzo Abe aimed to battle the nation's deflation rate by pouring more amount of money into the people's wallet. Shinzo Abe and his advisors also intended to increase government expenditure in order to boost domestic demand. They also thought of a structural change to create an economy that is more competitive and productive.

Shinzo Abe also aimed to weaken the yen thereby aiding major exporters to become more powerful. According to experts, the country has to focus more on its export growth as every 1% economic growth comes from the export growth range of 0.5% to 0.7%. Japan's economy, which depends mainly on local consumption, shrinks amid the growing old population that contributes less or nothing to the economy.

CNN Money quoted a senior expert at Capital Economics, Marcel Thieliant, as saying that the domestic demand is anticipated to grow in late 2016 as the people improve their shopping trend to defeat the sales tax increase. The nation is battling many domestic worries amongst the volatile market around the world.

In January, the Bank of Japan announced a negative interest rate which only caused a short flagging of the Japanese currency. Amid the gloomy economic figures, Tokyo stocks grew 7.2% during Monday trading session after robust gains in the US and European markets. This growth was also fuelled by a drop in Japanese currency against the US dollar.

Business expenditure increased 1.4% during the fourth of 2015 while quarterly private consumption fell 0.8%. Total exports added nearly 0.1% point to the country's GDP but inventories from private sectors deducted 0.1% point from Q4 GDP, Bloomberg said citing an official report.

According to Taro Saito, the director of NLI Research Institute, the poor growth in the nation's wages is a main reason for the ugly GDP figures in the last three-month period of 2015. Masamichi Adachi, a financial expert at JPMorgan Chase & Co, said that the Bank of Japan might take further steps at the March summit to improve the GDP.

The slowdown in Japan's economy is fuelled by the shrinking population, poor growth in export and weak domestic demand. The second largest economy in the world is moving forward with an aim to eradicate the errors of the past and to see a prosperous economic future.

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