Markets lurch as Japan enters technical recession

Japan has entered a technical recession according to preliminary data released earlier today knocking several stockmarkets into the red.

The country, the world’s third largest economy, released data which showed the economy contracted 1.6 per cent in the third quarter compared to the same period in 2013.

The data is in stark contrast to expectations for positive growth by many market participants who were expecting economic growth of 2.2 per cent.

Article continues after advert

Richard Troue, head of investment analysis at Hargreaves Lansdown, said Japan had entered a technical recession as this was the second consecutive quarter of negative growth.

“The slowdown in the previous quarter was widely attributed to a fall in demand for goods and services following a hike in consumption tax (VAT) to 8 per cent from 5 per cent,” he said.

“The slowdown in the three months to September looks to have been exacerbated by businesses cutting back spending.

“This is the fourth time Japan has slipped into recession since the financial crisis. This latest setback will fuel speculation prime minister Shinzo Abe will postpone by roughly 18 months a further rise in consumption tax to 10 per cent from 8 per cent (due to take effect next October).

“It has also been suggested he might call a snap election, though the timing would be questionable as his popularity is currently at a low point.”