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Japan back in recession but prospects look to be on rise

Japan has fallen back into recession following the March earthquake and tsunami, according to figures from the Japanese Cabinet Office.

The data, published last week, reveals the world’s third-biggest economy contracted by 0.9 per cent in the first three months of 2011 compared with the same quarter last year.

This follows an 0.8 per cent fall in GDP in the final quarter of 2010, placing the country in recession.

The figures show Japan’s economy shrank at an annual rate of 3.7 per cent during the first quarter of this year.

Japanese economics minister Kaoru Yosano says: “Japan’s economy is expected to remain weak for the time being but the economy has the strength to bounce back.”

Yosano claims disruption to the country’s supply chain caused by the March 11 disaster is easing and the reconstruction effort is likely to spur growth for the rest of the year.

The Bank of Japan agrees, saying the country’s economy is likely to fare better in the second half of 2011. It predicts a general improvement in overseas economic conditions will cause exports to rise and that domestic demand will grow as a result of the recovery effort.

Last week, the bank voted to keep interest rates at the current rate of 0-0.1 per cent and maintain its ¥10trn (£76.4bn) asset purchase programme.

Bestinvest senior investment adviser Adrian Lowcock says: “It is not a surprise Japan has gone back into recession. A big event like an earthquake can tip a country into recession in the short term but Japan will rebuild itself. It will not affect the fundamentals of the country in the long term.”


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