Japan: Recession and Elections
Japan, the world's third largest economy, formally entered recession once again -the fifth one in the last 15 years. The general economic slowdown arose right before the country's elections, at a time when the opposition leader Shinzo Abe demanded for more economic stimulus.
In November, Prime Minister Yoshihiko Noda's government approved a $10.7 billion spending package to stimulate the economy. However, this was not enough to thwart the impending recession which shifted the balance in favour of the Liberal Democratic Party. Certainly, in this context, LDP won popularity as Shinzo Abe promised to spend heavily on public works and to push the Bank of Japan to launch measures to boost growth if it wins.
The country's recession may be one of the causes for this result. According to official records, the Japanese economy shrank by 0.03% in the second quarter of 2012 –more than previously estimated- and then contracted by 0.9% in the third quarter.
The Guardian reported that Japan's economy has faltered due to a slowdown in exports propelled by the Eurozone crisis and a diplomatic spat with China. Likewise, a strong yen has slowed exports.
Tomo Kinoshita, chief economist at Nomura in Tokyo, told the Financial Times that “it shows how vulnerable Japan is to external demand conditions in Europe and Asia”. Experts expect the recession to linger as exports continue to be weak and domestic demand is stagnating with a tight labour market, The Financial Times reported.