MercoPress. South Atlantic News Agency

Japan's economy contracts 3.3% in last quarter of 2008

Japan's economy shrank at its sharpest pace in over three decades in the final quarter of 2008. The global financial storm and languishing overseas demand dealt a stunning blow to the export-driven economy and the world's second largest.

Gross domestic product fell by an inflation-adjusted 3.3% in the October-December quarter, compared with the previous three months, or 12.7% on an annualized basis, according to data released Monday by the Cabinet Office. The double-digit drop marked the Japanese economy's third consecutive quarter of shrinkage, and was the fastest contraction since an annualized 13.1% GDP drop in the January-March quarter of 1974, when the first oil crisis pushed up inflation and pushed down demand. In the July-September quarter, GDP fell a revised 0.6% on quarter, or an annualized drop of 2.3%. The grim GDP figures underscore how fast Japan's economic performance has worsened in the face of a global recession that has hit all of its biggest export markets. A steep drop in exports and falling profits has led companies to reduce both production and workforce. That has pushed down consumer spending, further squeezing corporate profitability. Indeed, exports fell 13.9% in the fourth quarter, compared with the third, marking the biggest slide since the survey was first conducted (Japanese exports rose 0.6% in July-September). The steep decrease in exports sharply pushed down business investment by 5.3%, following a 3.4% fall in the previous period. Moreover, private consumption, which accounts for around 55% of GDP, dropped 0.4% compared with an increase of 0.3% in the previous quart.