STEVE INSKEEP, host:
The world's second-largest economy is now formally in a recession. Japanese officials confirmed that today, because new figures show Japan's economy shrank by a tenth of one percent in the last quarter. Recessions are usually defined as two straight quarters of economic contraction, which Japan now has. Japan had been enjoying years of economic growth, but the global financial turmoil ended that, in part by taking a huge toll on critical exporters like Sony and Toyota, companies that depend on the economy in the United States. Transcript provided by NPR, Copyright NPR.
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INSKEEP: That economy is Japan, which is still the world's second largest, behind the United States. Japan's government formally announced a recession today. It follows Friday's announcement that Europe is also in a recession, using the common definition of an economy shrinking for two consecutive quarters. NPR's Louisa Lim has more on the news from Tokyo.
LOUISA LIM: Japan's economy had been enjoying its longest period of expansion since World War II. Today that officially came to an end. After seven years of growth, Japan has slipped back into recession. New figures out today showed that the economy shrank by 0.1 percent in the third quarter of the year. That translates to a drop of 0.4 percent year on year. And that's without accounting for the pandemonium that swept through financial markets in October. Masamichi Adachi, senior economist for JPMorgan Securities, outlines his predictions for the future.
LIM: Definitely quite a miserable forecast is we are looking for.
LIM: The government's room for maneuver is limited. Prime Minister Taro Aso has already unveiled two economic stimulus packages since late September and cut interest rates for the first time in seven years. Now the government's hobbled by its high debt and the fact that interest rates are already very low. Exporters have been hit by the Japanese currency's 13-year high against the dollar, with companies like Toyota and Nissan slashing their profit forecasts. With more misery ahead, some economists now fear Japan could be entering its longest recession to date. Louisa Lim, NPR News, Shanghai.
