The Japanese economy is facing a severe recession amid the global economic downturn, the head of a government panel that decides dates of business cycles said.
The panel decided on Thursday that Japan likely slipped into recession in October 2007, ending the economy's longest expansion period since World War II.
“Looking forward, I think the current economic downturn will be very severe even after we have already been in one for the last 14 months,” said panel chairman Hiroshi Yoshikawa, an economics professor at Tokyo University.
The announcement follows a similar verdict on the US economy by a US private research institute, the National Bureau of Economic Research (NBER), last month that a recession there began in December 2007.
Japan's economy had been in its longest economic growth cycle of the postwar era since early 2002. It lasted 69 months, or 12 months longer than the previous record marked during a boom in the late 1960s.
Yoshikawa said the economic expansion that ended in late 2007 was mainly led by exports.
By the same token, he said the current downturn has been severe as the global financial crisis dealt a blow to overseas demand for Japanese goods.
The longest downturn in the postwar period, which lasted for 36 months, was in the early 1980s when the country's economy staggered with the aftermath of a rise in oil prices.
Kazumasa Iwata, the head of the Cabinet Office's Economic and Social Research Institute, said exports contributed nearly 40% of an increase in the value of gross domestic product during the last expansion period. Japan defines a recession as the period between the peak and trough of the economic cycle, as opposed to the widely used definition of two consecutive quarters of decline in real gross domestic product.
The NBER also does not define a recession as two consecutive quarters of GDP contraction, as is the rule of thumb in many countries. Instead, it looks for a decline in economic activity, spread across the economy and lasting more than a few months. (Reuters)