Japan's economy shrinks at fastest pace since 2014, fuelling recession fears – business live

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Worries over the global economy have intensified today, after Japan’s economy suffered its sharpest contraction in five years.

Japanese GDP shank by 1.6% during the last three months of 2019, new government data overnight shows. That equates to an annualised contraction of 6.3%, against forecasts of 3.9%.

That’s a very sharp decline, and much worse than economists had expected. It means Japan has suffered its worst quarter since 2014 — and its second largest slump since the financial crisis more than a decade ago.

Consumer spending fell by 2.9% during the quarter, for the first time in over a year, led by weaker demand for cars, household appliances and alcohol.

Tokyo’s government must shoulder some blame — they were warned that hiking Japan’s sales tax to 10%, from 8%, last autumn would hurt consumption.

Business investment also dropped, driven by weaker spending on construction and production machinery.

And in another worrying sign, imports and exports both declined.

It underlines that Q4 2019 was bad time for the global economy, with growth slowing in China, the UK and Germany stagnating, and France and Italy contracting.

Adam Cole of RBC Capital Markets says fears over Japan’s economy are on the rise.

Consumer spending fell almost 3% q/q, more than reversing the Q3 rise (0.5%) as households reacted to the October consumption tax increase.

Private capital spending also slumped and the data will prompt talk of recession if the monthly data look like they are adding up to another fall in Q1.

Otherwise, it could be a quieter day in the markets….especially as Wall Street is shut for President’s Day.

The agenda

• 10am GMT: Eurozone construction output for December