TOKYO — Japanese consumers are closing their wallets as the economy’s outlook darkens, making it harder for Prime Minister Yoshihiko Noda to stave off the nation’s third recession in four years.
Households are holding the most cash since 2005, shunning risk as they grow gloomier about the economy, Bank of Japan data show. Sliding private consumption contributed to an annualized 3.5 percent decline in gross domestic product in the past quarter, a Cabinet Office report showed Monday.
While Noda may have avoided a fiscal cliff as the opposition agreed to a deal on deficit-financing legislation, the consumer malaise highlights the challenge of reviving growth in the world’s third-largest economy. At the same time as he tries to rebuild relations with China to support exports, Noda may need to come up with more incentives for consumer purchases at home.
“The Japanese government has no choice but to implement additional measures to shore up the economy,” said Junko Nish- ioka, chief economist at RBS Securities Japan and a former Bank of Japan official. “The dispute with China, the decline of the stock market, and confusion over the political situation in Japan are hurting confidence.”
The Nikkei 225 Stock Average closed down 0.2 percent in Tokyo, its seventh day of decline and 15.5 percent below this year’s high in March.
Sentiment on the economic outlook was the weakest last month since the aftermath of the 2011 earthquake, a government survey showed, with the end of car subsidies and a looming sales-tax increase also making people more pessimistic.
Japan risks its third textbook-definition recession since 2008, meaning two straight quarters of contraction. The median forecast in a survey of economists by Bloomberg News is for an annualized 0.4 percent contraction in the September to December period. Japanese recessions are officially defined by a governmentcharged panel that considers data beyond GDP figures.
“We need a firm response considering the grim outlook for the Japanese economy,” Economy Minister Seiji Maehara told reporters Tuesday. He declined to comment on the size of any new fiscal stimulus measures.
Consumption in the third quarter dropped at an annual rate of 1.8 percent after a 0.4 percent fall in the previous three months, the first backto-back decline since the global financial crisis, Monday’s report from the Cabinet Office showed.
The main index in the government’s Economy Watchers Survey, which looks at how people feel about the outlook for the next two to three months, fell to 41.7 in October, the lowest level since the aftermath of last year’s earthquake. A figure under 50 indicates that more people see conditions deteriorating than improving.
Respondents to the survey included a travel agent in the Tokai region of central Japan, who complained that territorial disputes with China and South Korea were deterring people from traveling abroad. A car salesman in Shikoku, southern Japan, said the end of government subsidies for fuel-efficient cars was hurting business, while a supermarket manager in the same region noted concerns among shoppers over a planned doubling of the sales tax.
Business, Pages 27 on 11/14/2012