The Japanese government yesterday admitted that the economy is "weakening" for the first time since 2001. The worsening economy coupled with continuing inflation will probably mean that the Bank of Japan will keep its benchmark interest rate at 0.5 percent for the time being at least, although, with oil prices dropping the next move is more likely to be down than up.
It is highly likely that Japan's economy contracted in the last quarter, bringing the country to the brink of its first recession in six years, as exports fell and consumers spent less. Exports may well have fallen by around 2.4 percent over the quarter. Export shipments had increased in every quarter except one since the most recent recession in 2001.
The economy may well have sontracted by some 0.6 percent from the first quarter, when it grew 1 percent, about twice the average pace of the expansion that began in 2002. The Cabinet Office will release the preliminary Q2 GDP report on Aug. 13.
