Of course this will all be written off as the fault of the March 11 disaster which occurred with only 20 days left in the quarter. Not that the disaster did not have a profound effect on the real economy even as the BOJ was all in the equities market to keep it and real estate afloat. This officially puts the Japanese economy into recession for the 3rd time in a decade, proving once again that politicians and bureaucrats don’t know the first thing about managing the economy. And neither do economists whose predicted consensus of a 1.9% drop was doubled by the actual numbers.
Japan’s economy shrank more than estimated in the first quarter after the March 11 earthquake and tsunami disrupted production and prompted consumers to cut back spending, sending the nation to its third recession in a decade.
Gross domestic product contracted an annualized 3.7 percent in the three months through March, following a revised 3 percent drop in the previous quarter, the Cabinet Office said today in Tokyo. The median forecast of 23 economists surveyed by Bloomberg News was for a 1.9 percent drop.
But the trauma is not over for Japan.
“The contraction in the second quarter will probably be even bigger as consumer spending and exports slump,” said Norio Miyagawa, senior economist at Mizuho Securities Research and Consulting Co. in Tokyo. “The economy will likely return to growth from the third quarter once the supply-chain disruption eases and reconstruction work begins.”
Yet the still hopeful Japan, Inc sees this a merely a temporary blip in the less than parabolic recovery.
The economic contraction may only be a “temporary phenomenon,” and two straight quarters of shrinkage “doesn’t necessarily mean the economy’s trajectory has changed,” Kaoru Yosano, the economy minister, told reporters today.
Economists typically define a recession as two consecutive quarters of contraction. The Japanese government instead determines recessions by having a committee of academics decide when recoveries and retreats begin and end.
“We look for a classic V-shaped recovery in the July-to- September period and after,” said Kyohei Morita, chief economist at Barclays Capital in Tokyo. “A self-sustaining recovery in production, an increase in government consumption and reconstruction demand centered around public works will likely support the economy.”
Ah…the old V-shaped recovery, whereby consumption demand increases for no reason and the banks get free money to buy equities. And this prediction from the same economists who missed on the last two quarters. As for being in a recession recognized everywhere else in the world, we will assume that the government-funded academics will not find Japan in recession given the government’s predilection for protecting the public from bad news lest they take to the streets in panic.
More from Zero Hedge:
Confirming once again that Wall Street economist (and sell side in general) is the most useless profession in the world (though gladly accepting a 7 figures compensation), is the latest data out of Japan which is yet another stunner to most, as nobody, nobody, could have possible predicted that the Japanese economy would literally fall off a cliff in Q1, plunging at a 3.7% rate (down from -3% previously), which is double the consensus print of -1.9%. DOUBLE. And in nominal terms the collapse was simply epic: -5.2%! And yes, this is officially a recession. Of course, anyone reading Zero Hedge would have been perfectly aware of this outcome. 4 short days ago we said: “Increasingly we have come to believe that the real marginal economy over the next several quarters will be neither that of the contracting US, nor that of the rapidly tightening, yet still very much inflationary China, but the (arguably) third largest one: that of Japan.” Today our prediction is more than confirmed. And instead of hiding deep in the whatever holes these morlocks cralwed out of, Bloomberg for some inexplicable reason continues to look to their blatantly horrendous opinion. “The negative economic impact from the disaster will be on full display during the second quarter,” Hiroshi Watanabe, a senior economist at the Daiwa Institute of Research in Tokyo, said before the report. “This recession may be deep, but short.” Yeah, sure. Short. We’ll just hold our breath. And for it to be short, it means that the BOJ will be forced to print a few hundred trillion in Yen asap (just as we predicted here and here) right? Which in turn means that the USDJPY will surge and shift the Japanese recession even faster over to the US. And yes it means that the turbo print button among the central banks will get the F5 treatment as the second round of currency devaluation completes a lap.
This can’t be encouraging news for Kan who needs any sort of good news about now. It aggravates the funding issues for reconstruction and takes any talks of a consumption tax hike off the table for now as such an increase would be the final nail in the coffin of the economy. Of course, for Kan, the question is not what he will do, but what Obama will tell him to do.