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Japan Economy Shrinks By 0.4% in Fourth Quarter

In the last three months of 2015, Japan’s economy shrank by 0.4%, according to official figures, causing more headaches for the government, which is in the process of implementing economic reforms.

Japan Economy Shrinks By 0.4% in Fourth Quarter

It was expected that the economy may contract by 0.3% on a quarterly basis. The country’s disappointing economic performance may be attributed to weaker demand domestically and slower housing investments.

On an annual basis, Japan’s economy shrank by 1.4 percent in the same period, higher than the expected contraction of 1.2 percent annualized.

Japan’s Prime Minister, Shinzo Abe introduced his economic policy reforms dubbed Abenomics, following his election win in December 2013.

The reforms had the goal of mitigating deflation, which has encumbered the economy for close to twenty years, as well as increase investment and domestic demand. The reforms also aimed at weakening the yen to allow major exporters such as Toyota to compete effectively.

However, according to analysts, slow growth has impacted the country’s economic performance. To ensure future economic growth, Japan needs to grow its exports.

Although the country largely depends on domestic consumption, the population is ageing rapidly therefore there are fewer people contributing to the Japanese economy.

Haruhiko Kuroda, the country’s central bank governor has always asserted that he would do whatever it takes to bring down two decades of deflation.

In the third quarter leading up to September of 2015, Japan teetered at the edge of a technical recession. The country has already fallen into recession four times since 2008/2009 during the global financial crisis.

However, economist Martin Schulz says, ‘Just one negative growth number should not be over-analyzed. Japan’s economy is in rather good shape and the reform policy continues to receive strong support.”

Last month, the Bank of Japan introduced a -0.1% interest rate, the first ever negative interest rate in Japan in an effort to boost investment and spending, which is hoped to increase economic growth.

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