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Japan's economy contracted in the third quarter owing to waning business investment and slumping inventories, entering a technical recession for the second time since Prime Minister Shinzo Abe came into office in 2012 and unrolled two editions of his aggressive "Abenomics" blend of economic policy.
According to data released by the Cabinet Office on Monday, Japan's economy contracted an annualized 0.8 percent in the July-September quarter of 2015, marking a second straight quarterly contraction, following a revised 0.7 drop in the second quarter.
On an inflation-adjusted basis, the gross domestic product in Japan declined 0.2 percent from the previous quarter.
In the recording period while consumption, which accounts for some 60 percent of Japan's overall economy, showed an uptick of 0. 5 percent from the previous quarter, a drop in business investment and inventories contributed to the contraction, the government's data showed.
While exports were up 2.6 percent following a 4.3 percent dip in the previous quarter, the government's data showed that corporate capital spending dropped 1.3 percent, marking the second straight quarterly fall, as firms here remain circumspect about spending due to a slowdown in emerging economies.
The latest GDP data, which reflects the total value of goods and services produced at home, came in below median analysts' expectations for between a 0.2 and 0.3 percent contraction, and some economists maintain that the growth rate looking ahead could be sluggish, putting more pressure on Abe and the central bank to unroll more fiscal stimulus to shore up the economy.
Atsushi Takeda, an economist at Itochu Corp. in Tokyo, noted that further stimulus may be imminent as the prime minister has laid out lofty growth goals of expanding Japan's nominal GDP by 20 percent to 600 trillion yen (4.90 trillion U.S. dollars) over five years.
The central bank is also under increasing pressure to hit a 2 percent inflation target, after the Japanese economy has been mired in deflationary pressure for decades.
"Japan's economy is in a soft patch, and even though it may rebound in the coming months, the momentum will probably be very weak. The government will probably have no choice but to take action to stimulate the economy, and pressure for additional monetary easing will likely build up again," Takeda said.
Takeda added that business spending was unlikely to increase in the near future, owing to concerns about a slowdown in emerging economies.
But Japan's economy minister Akira Amari on Monday maintained that the economy was on a "moderate recovery path" despite some weakness and that it would continue to improve gradually even though overseas economies "posed downside risks."
Amari added GDP is likely to expand in the October-December period and may be underpinned to an extent by an extra budget for the Trans-Pacific Partnership and measures to combat the rising costs of social security as the population here continues to age and shrink.
