With Q3 contraction, Japan economy plunges to technical recession

Downward GDP revisions result in consecutive negative growths.

According to BBVA's daily flash report, the final reading for Japan’s third quarter GDP came out in line with last month’s estimate of a -0.9% q/q, s.a. contraction. Together with a slight downward revision of Q2 GDP to –0.1% (from a slight positive previously), the revisions put the economy into a technical recession of two consecutive quarters of contraction.

"The news underscores the difficulties facing the economy from weak exports and softening domestic demand," BBVA said.

"In particular, in Q3 private consumption, which accounts for around 60% of GDP, declined by -0.4% q/q, s.a., and exports dropped by -5.1% q/q, s.a.. We expect the contraction to continue in the fourth quarter given weak external demand," it added.

BBVA said policies to stimulate the economy have taken center stage ahead of the general election scheduled for December 16, with pressure on the Bank of Japan to step up its asset purchase program to ward off deflation and curb the strength of the yen, which has recently depreciated to ¥82.2 per USD, some 6.1% weaker from its peak in mid-September.