Japan’s economy contracted in the final three months of 2015, adding to a string of setbacks for the government’s economic reform policy. Between October and December, it shrank by 0.4% compared with the previous quarter. Weaker domestic demand together with slower investment in housing contributed to the disappointing numbers. On an annualised basis the economy contracted 1.4% during the period; that compares with expectations for an annualised contraction of 1.2%.
Despite Prime Minister Shinzo Abe’s plan to revive the economy, dubbed Abenomics, growth has remained a concern. Analysts say that Japan needs to ensure exports grow in order to support future economic growth – for every 1% that Japan’s economy grows, between 0.5% and 0.7% comes from exports. Also, in a surprise move to increase spending and investment, the Bank of Japan (BOJ) last month introduced a negative interest rate of -0.1%. Some analysts, however, have cast doubt over how effective the rate cut will be.