Japan economy contracts, adds to reform policy setbacks

PanARMENIAN.Net - Japan's economy contracted in the final three months of 2015, adding to a string of setbacks for the government's economic reform policy, BBC News reports.

Between October and December, it shrank by 0.4% compared with the previous quarter, official figures show.

Expectations for the numbers were for a quarterly contraction of 0.3%.

Weaker domestic demand, together with slower investment in housing, contributed to the disappointing numbers.

On an annualized basis the economy contracted 1.4% during the period. That compares with expectations for an annualized contraction of 1.2%.

The annualized figure is the rate at which the economy would have contracted over a full 12 months had the December quarter been a reflection of the entire year.

Prime Minister Shinzo Abe's plan to revive the economy - dubbed Abenomics - was introduced after his December 2013 election win. Its aim was to combat deflation, which Japan has struggled with for nearly two decades, as well as boost demand and investment. It also wanted to weaken the yen, so helping big exporters like Toyota become more competitive.

But growth has remained a concern. Analysts say Japan needs to ensure exports grow in order to support future economic growth - for every 1% that Japan's economy grows, between 0.5 and 0.7% comes from exports.

The country also relies heavily on domestic consumption but its population is ageing and shrinking so fewer people are contributing to the economy.