Japan's GDP drops further in Q4

Japan's fourth-quarter contraction was twice what analysts had predicted.

The Japanese economy shrank 2.3 per cent -- more than analysts had predicted -- in the fourth quarter, according to GDP data from Japan's cabinet office released today.

Japan's October-December economic output was 0.6 per cent lower quarter-on-quarter, double the 0.3 per cent figure analysts had predicted. The Japanese economy shrank 0.9 per cent for 2011 as a whole.

Thailand's worst floods in half a century contributed to the GDP loss, lowering production capability for many Japanese manufacturers. The floods came shortly after many Japanese exporters appeared to have been recovering from the earthquake and tsunami on 11 March last year.

A strong yen and weak export demands in the wake of the European debt crisis also contributed to the fourth quarter drop. The yen was at its strongest ever against the US$ the end of October, and rose nearly 10 per cent against the euro in 2011.

Automotive and electronics companies -- particularly Sony, Panasonic and Honda -- have suffered due to weak exports. In January, Japan announced its first trade deficit in 31 years.

The final quarter of 2011 was the fourth over the last five during which the Japanese economy contracted. Japan's GDP grew 4.4 per cent in 2010.

Bank of Japan officials are meeting today and tomorrow.