Japan's GDP Continues Rapid Decline

Japan's GDP Continues Rapid Decline

TOKYO, May 20 -- Japan's export-addicted economy shrank during the first quarter at the fastest pace in more than 50 years, continuing a dismal trend that since last year has made it the worst performer among major countries.

A sustained collapse in exports, especially of cars and electronics to the United States, led to an annualized 15.2 percent decline in the gross domestic product in the first quarter of this year, the government said Wednesday. That was after a 14.4 percent annualized decline from October to December.

Japan's rate of contraction is more than double that of the United States, where GDP shrank at an annualized rate of 6.1 percent in the first quarter.

For the first time on record, the total value of goods and services produced in Japan fell for four consecutive quarters, the government said.

As exports have fallen sharply in the past year, most Japanese companies have sharply curtailed production and drawn down inventories. Famously well-run companies such as Toyota have posted record losses, idled factories, laid off workers and apologized to the public.

Even though the first-quarter numbers were wretched, they were better than some economists had predicted. Meanwhile, there are a number of tentative signs in Japan, as in the United States, that the worst recession since World War II may have bottomed out.

Stocks here have bounced back by about 33 percent from a quarter-century low in early March. Some economic analysts are predicting a return to growth as soon as this summer.

Orders for machinery, an indicator of companies' plans for future spending, have begun to rise. Consumer confidence climbed to a 10-month high last month, and a huge government stimulus package is expected to revive domestic demand.

When the global economic crisis surfaced last fall, the yen rose sharply against the dollar, making Japanese exports more expensive just as demand for them was disappearing. The value of the yen has moderated this year, making Japanese exports more attractive.

Still, the size of the economic contraction announced Wednesday seems likely to hurt Prime Minister Taro Aso, whose party must contest a national election by September and who has struggled to find public support since assuming power in September.

"This will be a very serious blow to Aso," said Minoru Morita, a Tokyo-based political analyst. "He has been postponing the election, claiming that he needed time to enact an economic stimulus. But the general public's perception is: 'These numbers are so bad. What is Aso doing?' "

Polls released this week show that the ruling Liberal Democratic Party trails the opposition Democratic Party of Japan by more than 12 percentage points.

The opposition party appears to have weathered the scandal-triggered resignation last week of its longtime leader, Ichiro Ozawa, without losing public support. Ozawa quit after his chief aide was indicted on charges of accepting illegal campaign money.

In normal circumstances, the scandal would have helped Aso and the ruling party recover, Morita said. But because of the sinking economy, he said, "people just feel very strongly that it is simply not possible to entrust power to Aso anymore."

Special correspondent Akiko Yamamoto contributed to this report.