Japan economy shrinks at annualized 2.3 per cent

Feb 13, 2012, 2:16 GMT

Tokyo - Japan's economy shrank at an annualized pace of 2.3 per cent in the October-December quarter, caused by the temporary effects of massive flooding in Thailand, the government said Monday.

The nation's gross domestic product (GDP) figure for the quarter fell 0.6 per cent from the previous quarter, the Cabinet Office said in a preliminary report.

Exports dropped 3.1 per cent from the previous quarter as the flooding in Thailand in late 2011 disrupted Japanese manufacturers' production.

Public investment also fell 2.5 per cent from the previous quarter.

But domestic consumption, which accounts for 60 per cent of Japan's gross domestic product, edged up 0.3 per cent, while corporate capital spending grew 1.9 per cent, the office said.

Economics Minister Motohisa Furukawa said the economy was maintaining upward momentum.

In late January, the Bank of Japan downgraded its economic growth outlook for the current financial year that ends in March to a 0.4-per-cent contraction from a 0.3-per-cent expansion forecast in October.

Compared with the bank's projections in October, 'growth prospects will likely be lower' for the year, due to the revision of past gross domestic product statistics in addition to an economic slowdown overseas, the central bank said.

'Japan's economic activity has been more or less flat,' mainly due to the effects of the slowdown in overseas economies and the yen's strength against major currencies, the bank said.

The yen is still close to a record high against the euro and the dollar, which has hurt export-reliant Japan.