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Japan recession worse than thought in third quarter

Japanese economy shrank 0.5% on a quarterly basis, worse than the 0.4% estimated in initial data
Japanese economy shrank 0.5% on a quarterly basis, worse than the 0.4% estimated in initial data

Japan's economy contracted more than initially thought in the three months from July to September, revised official data revealed today.

Today's new data showed that the world's third largest economy sank deeper into recession. 

The economy shrank 0.5% on a quarterly basis, worse than the 0.4% estimated in initial data released three weeks ago, the Cabinet Office said.

The drop came after a 1.7% contraction in the April-June quarter, meeting a common definition of a recession as two consecutive quarters of negative growth. 

On an annualised rate, the economy shrank 1.9% in the third quarter compared to the initially-estimated fall of 1.6%. 

Prime Minister Shinzo Abe over the past two years has pressed ahead with a pro-spending growth bid, known as "Abenomics", which boosted stock prices and pushed the yen down. 

Where it had been credited with success up until the effects of a sales tax rise in April this year, today's revised data showed the economy in fact contracted 0.4% in the last quarter of 2013. 

It expanded 1.4% in the first quarter on shoppers' last-minute buying binge before the tax rise. 

Japan's VAT rate rose from 5% to 8% on April 1, hitting consumers.

Private consumption picked up only 0.4% after plunging 5.1% in the three months from April to June, the latest data showed.

Private residential investment dived 6.8% while private-sector corporate capital spending fell 0.4%.
 
Separate data from the finance ministry showed Japan posted an 833.4 billion yen surplus in October on its current account, reversing a deficit of 154.3 billion yen thanks to a weaker yen and lower oil prices. 

The current account is the broadest measure of the country's trade with the rest of the world. 

Income jumped with higher gains from equity and other direct investment, as well as from investment in financial items, partly inflated by a lower yen. 

The deficit on the services section was more than halved as the number of foreign tourists soared 37 percent to hit a single-month record. 

Faced with poor economic data last month, Abe delayed a second tax hike planned for next year to 2017.

He also dissolved the lower chamber of parliament for snap elections on December 14, two years ahead of schedule, as he seeks to bolster his public support. 

The tax rises are aimed at paying down Japan's enormous national debt, but they have put Abe in a tricky position as he tries to balance them with his growth plan.