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Prime Minister Yukio Hatoyama greets Lars Løkke Rasmussen, Prime Minister of Denmark, Monday March 08, 2010.
Japan today announced a downward revision in its fourth quarter 2009 GDP (gross domestic product) and the economy actually contracted in the third quarter.
The Cabinet Office announced a cut in fourth quarter annual GDP rate to 3.8% from the initial 4.6% announced last month. The government said the revision reflected declines in private sector inventory and weak business and government spending. In the fourth quarter the economy grew 0.9% at an annualised rate and 0.2% compared with the previous quarter, slower than the preliminary annualised rate of 1.1%. In the third quarter, the economy contracted an annualised 0.6% down from 0.03% as previously estimated, reflecting inventory drops.
Nominal GDP (at current prices) rose 0.1% on the quarter, making for an annualised growth of 0.5%. Capital expenditures expanded by 0.9%, down from an initial reading of 1%; Private inventory cut 0.1% from growth, after the initial report showed it added to GDP.
For the 2009 calendar year, the GDP contracted by 5.2%, worse than the 5.0% initially projected by the Cabinet Office.
In recent quarters, there have been big revisions in data because of problems with the system of estimating GDP components. Nevertheless, the published data signals the fragility of the recovery that is largely dependent on exports to China and the US.
Domestic demand is weak amidst continuing deflation and the Cabinet Office data today included the price deflator, an indicator of price trends, which was at minus 2.8% - - the highest since 1955. It was revised from a preliminary reading of minus 3.0%.
Finance Minister Naoto Kan last week called on the Bank of Japan to take measures to stop deflation, saying he hopes prices will rise this year.
Japan has revised downwards its Q4 GDP growth to 0.9%. Frederic Neumann, senior Asian economist at HSBC, tells CNBC's Martin Soong & Karen Tso that this revision adds pressure on the BOJ to extend its easy monetary policy:
