[shadow=black]Japan, the second largest economy in the world,
has become the latest country to officially
slip into recession.[/shadow]
It joins Germany, Italy, Spain and Ireland on the
list of major nations that have had two successive
quarters of their economy shrinking.
Japanese shares ended slightly higher after a volatile day,
starting lower but then recovering later as the
yen grew weaker.
The benchmark Nikkei 225 stock average finished
up 60.19 points, or 0.7%, at 8,522.58.
It sank nearly 250 points early in the session after
gloomy gross domestic product figures, then bounced
up about 550 points from there before coming back
down at the finish.
The news that export-dependant Japan is in recession
for the first time in seven years comes despite
emergency steps by world powers to try to stem
months of turmoil on the financial markets.
"Japan is as export-driven as ever. So as long as exports
are slowing due to the weakness of the global economy,
we cannot escape," said Kyohei Morita, economist at
Barclays Capital, who expects the recession to last for four quarters.
The economy contracted 0.1% in the third quarter after
shrinking 0.9% in the second.
The last time Japan fell into recession was in 2001
after the internet bubble burst.
[shadow=black]Some analysts believe the bad news had
already been priced into a market
that has seen its growth halved in the last 12 months[/shadow]
The latest figures "showed that the economy is in a
recession phase. There is a risk it may worsen further,"
warned Economic and Fiscal Policy Minister Kaoru Yosano.
"This is not going to be a short or painless recession,"
said Noriko Hama, a professor and economist at Doshisha University.
"When financial crises of this magnitude occur, as a
rule of thumb we generally have a 10-year recession.
We had that in the 1990s in Japan," she said.
Business investment has slumped 1.7% in the third quarter
while exports were worse than expected, as the financial
crisis triggered by a US housing slump squeezed other major economies.
Although Japan has not suffered financial turmoil on
the same scale as the United States or Europe,
its trade-dependent economy remains highly vulnerable
to global downturns.
After suffering a series of on-off recessions in the 1990s,
Japan had been slowly recovering on the back of brisk
exports and business investment.
But corporate profits are now sliding as exports suffer
from the global slowdown and a stronger yen, prompting
companies to slash investment in new equipment and factories,
which had been a key driver of economic growth.
Source: Sky News - http://news.sky.com