The Japanese economy has slipped into the third recession in the last decade in the wake of the earthquake and tsunami in March that slowed production and prompted consumer to cut back on spending, according to Bloomberg. On Thursday, the Cabinet Office of Japan reported that the economy shrank at an annualized rate of 3.7% in three months through March after a revised contraction of 3% in the fourth quarter of 2010. The steep first quarter drop was almost double the 1.9% decline that economists’ had forecast, and brought the economy to its smallest size since 1991, unadjusted for price changes.
Norio Miyagawa of Mizuho Securities Research and Consulting offered a dire forecast, warning, “The contraction in the second quarter will probably be even bigger as consumer spending and exports slump.” Miyagawa continued, “The economy will likely return to growth from the third quarter,” which is in line with the forecast from the Japanese economy minister, Kaoru Yosano, that the decline will be a “temporary phenomenon.” Adding to the concern over the state of the economy was the sharp revision of the fourth quarter contraction to a level more than double the original estimate.