Japan's economy shrank in the last three months of 2012, giving the government ammunition to defend its "weak yen" strategy as necessary to getting growth back on track.
Japan finds ammunition to push for weak yen as economy shrinks
Japan's economy shrank in the last three months of 2012, its third straight quarter of contraction, giving the government ammunition to defend its "weak yen" strategy as necessary to getting growth back on track.
The 0.4 per cent contraction in annualized terms in October-December was worse than expected. Many analysts had forecast the economy would emerge from recession in the final quarter of 2012 as the Japanese yen weakened against other major currencies, giving a boost to Japanese export manufacturers.
The chief government spokesman Yoshihide Suga acknowledged the lingering weakness in the economy, while voicing optimism over a global recovery.
"We also expect our nation's economy to make a gradual recovery," he said.
The data predate prime minister Shinzo Abe's administration, which took power in late December with a platform of aggressive spending and monetary stimulus that has helped drive the yen to near three-year lows after years of hovering at much higher levels due to the currency's status as a "safe haven" for investors.
Although the government has not directly intervened to bring the yen's value lower, its policies have convinced many in the markets that more money will be created, undermining its value. That has brought on a 20 per cent depreciation of the yen against the dollar since October, raising concern over the potential for competitive devaluations of other currencies that could undermine growth.
The issue will likely come up at a meeting of top financial officials of the Group of 20 leading industrial and developing countries in Moscow beginning tomorrow.
Finance minister Taro Aso said he intended to thoroughly explain Japan's stance at that gathering.
"The world has been awed," Mr Aso said of the recent surge in share prices and weakening yen that has "brought huge benefits to the export sector." "All countries want to know how we have done this; it is absolutely not a result of us intervening in foreign exchange markets."