Japan’s Economy Contracts

Japan's gross domestic product shrank at an annualized rate of 3.5% in the July-September period compared with the previous three months, the country's Cabinet Office reports. The contraction reversed two previous consecutive quarters of growth.

Economists attribute the slowdown to a 0.5% drop in domestic consumer spending and lower global demand for Japan's exports. The strong yen and heightened anti-Japan sentiment in China the country's biggest trading partner have exacerbated the latter.

Japan's GDP is likely to shrink again in the current quarter, analysts say, thus sinking the country into recession, which is defined as two consecutive quarters of contraction.

A Japanese government index of economic sentiment dropped last month to its lowest level since the aftermath of the country's March 2011 earthquake and tsunami. The recent expiration of subsidies for the purchase of fuel-efficient cars and an impending sales-tax increase are contributing the gloom, according to the survey on which the index is based.