Japan's 1Q GDP revision confirms steep recession

[June 11, 2009]  TOKYO (AP) -- Japan's economy shrank at a 14.2 percent annual pace in the first quarter -- better than first thought, but still the worst quarterly contraction ever for the world's second-largest economy.

A preliminary report last month had said gross domestic product declined at a 15.2 percent pace.

The slight improvement in the revision released Thursday does nothing to change the reality that Japan's economy is in its steepest recession since the end of World War II.

Exports have plunged, companies have slashed production and families are spending less. The economy has contracted for four straight quarters, including a revised 13.5 percent in the October-December period.

The first quarter revision stemmed from less severe declines in capital expenditures, the government said. Business investment in factories and equipment fell a revised 8.9 percent from the previous quarter, while consumer spending slipped 1.1 percent.

Japan's first quarter results are also markedly worse than those of other major economies, including an annualized 5.7 percent contraction in the U.S.

Still, there is burgeoning room for optimism. Analysts generally agree that Japan's economy probably hit bottom in the first quarter, and recent signs point to a GDP rebound in the April-June period. The decline in exports is slowing, and industrial production surged in April.

Japanese manufacturers in particular are benefiting from expanding demand from China. The impact of government stimulus measures, including cash handouts and consumer incentives to buy "green" products, are also starting to give the economy a boost.

Toyota Motor Corp. said last month that it is revving up production of its hit Prius to meet better-than-expected demand for the latest version of the world's top-selling hybrid.

But data Wednesday on April machinery orders suggests that overall, companies remain cautious when it comes to spending.

Japan's core machinery orders, a closely watched indicator of corporate capital spending, fell 5.4 percent from March to 688.8 billion yen ($7.1 billion). The result marked the lowest value since April 1987 and could mean that a recovery may be some time off.

Japan has been pummeled by the unprecedented collapse in global demand triggered by the U.S. financial crisis. Its exports plummeted a record 26 percent in the first quarter from the fourth quarter, the government said, unchanged from its preliminary report.

Major exporters such as Toyota and Sony Corp. have reacted by reducing shifts, suspending factory lines and slashing workers. The jobless rate jumped to 5 percent in April, the highest in six years.

In the stock market, the benchmark Nikkei 225 stock average broke above the psychologically key 10,000 level for the first time since Oct. 8 before closing down 10.16 points, or 0.1 percent, at 9,981.33.

[Associated Press; By TOMOKO A. HOSAKA]

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