The economy shrank for the second quarter in a row for the fifth time in seven years, figures showed, increasing the pressure on Shinzo Abe

Japan has slid back into recession for the fifth time in seven years amid uncertainty about the state of the global economy, putting policymakers under growing pressure to deploy new stimulus measures to support a fragile recovery.

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The world’s third-largest economy shrank an annualised 0.8% in July-September, more than a market forecast for a 0.2% contraction, government data showed on Monday.

That followed a revised 0.7% contraction in the previous quarter, fulfilling the technical definition of a recession which is two back-to-back quarterly contractions. It is the fifth time Japan has entered recession since 2008, a so-called “quintuple dip”.

The Nikkei share average dipped sharply by at the opening of trade on Monday as the poor figures compounded nervousness on markets in the wake of the Paris terror attacks. But it recovered to just 1% down at lunchtime on the hope that the news would force policymakers to launch another round of stimulus measures.

“The headline was weak, but the market is shifting to expectations for more measures,” said Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management.



The yen rose slightly, reflecting its safe haven status against the euro.

But the outlook for the Japanese economy remains weak. Many analysts expect the economy to grow only moderately in the current quarter as companies remain hesitant to use their record profits for wage rises, underscoring the challenges premier Shinzo Abe faces in pulling the country out of stagnation with his “Abenomics” stimulus policies.

The dismal reading may affect debate among politicians and policymakers on how much fiscal spending should be earmarked in a supplementary budget that is expected to be compiled this fiscal year.



Private consumption, which accounts for about 60% of the economy, rose 0.5% from the previous quarter, roughly in line with forecasts.

But capital expenditure fell 1.3%, which was more than expected. External demand added 0.1 percentage point to GDP growth, while domestic demand shaved 0.3 point off growth, the data showed.

The weak data would be of little surprise to many Bank of Japan officials, who had largely factored in the recession and expect growth to rebound in coming quarters as consumption and factory output show signs of a pick-up.

While the data will be closely scrutinised by the policymakers, the BOJ is widely expected to keep monetary policy steady at its rate review this week, analysts say.

Last month the BOJ cut its economic growth and inflation projections but held off on expanding stimulus, hoping that the economy recovers well enough to accelerate inflation to reach the its ambitious 2% target.