- Masamichi Adachi, an economist at JPMorgan Chase & Co.
Japan's economy shrank in the final quarter of 2015 despite of more than three years of Abenomics programme aimed at rejuvenating the world's third biggest economy. Japan's economy contracted an annualized 1.4% in the three months through December as consumers refrained from spending, while exports to emerging markets failed to gather enough momentum to make up for weak domestic demand. The decline in gross domestic product appeared to be bigger than economists' median forecast for a 1.2% drop and followed a revised 1.3% rise in the preceding quarter, according to Cabinet Office. Private consumption, which accounts for 60% of GDP, declined 0.8%, a sign Abe's stimulus programme have so far failed to encourage households to spend. While domestic demand subtracted 0.5 percentage point from GDP growth, external demand, or net exports, added 0.1 point amid a decline in the value of imports triggered by plunging oil prices.
Last month the Bank of Japan stunned markets by introducing a negative benchmark interest rate, in an attempt to stimulate the economy as volatile financial markets threatened its efforts to overcome deflation. Analysts expect the central bank to take additional easing at its next meeting in March, as the downside risks to the BoJ's outlook for growth and inflation are increasing.
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