An article on Japan's slashed growth estimate for 2009

1. Japan growth estimate slashed
December 9, 2009 (source: Sidney Morning Herald)
Japan's economy expanded less than initially estimated in the third quarter as companies
cut spending in the wake of the country's deepest postwar recession.
Gross domestic product rose at an annual 1.3 per cent pace, slower than the 4.8 per cent
reported in preliminary figures last month, the Cabinet Office said today in Tokyo. The
median estimate of 17 economists surveyed was for 2.8 per cent growth.
Today's report showed companies are cutting investment in plant and equipment to protect
earnings, fueling concern about a recovery that's already under threat from deflation and a
rising yen. Prime Minister Yukio Hatoyama unveiled a 7.2 trillion yen ($89.5 billion) stimulus
package yesterday, the first for his Cabinet, and the Bank of Japan last week decided a 10
trillion yen credit program to support the economy.
EUR / USD against JPY exchange rate
"Japan's economy isn't in good shape and the outlook is cloudy,'' said Yuuki Sakurai, chief
executive officer of Fukoku Capital Management Inc. in Tokyo. "In the case of Japan, a crisis
happens once in five years, not once in 100 years, so companies get scared of increasing
business investment.''
Investment by companies drove the downward revision in last quarter's growth. Capital
spending fell 2.8 per cent in the three months through September from the previous
quarter. That compares with the 1.6 per cent increase reported last month.
Slower growth
The economy expanded 0.3 per cent in the third quarter from the previous three months,
the Cabinet Office said, slower than the 1.2 per cent first reported.
Consumer spending, which makes up about 60 per cent of the economy, climbed 0.9 per
cent, compared with a 0.7 per cent gain initially reported. Exports increased 6.5 per cent
from the previous quarter, compared with the 6.4 per cent first published.
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2. Some exporters are scaling back their spending plans as the yen's rise to a 14-year high
threatens their profits and market share.
Toyota Motor Corp., Japan's biggest automaker, aims to cut capital investment by 70 billion
yen from its initial plans for the year ending March, the most among major companies, a
Nikkei Inc. survey showed on Nov. 30.
Sony Corp., forecasting its first consecutive annual loss since its listing in 1958, said last
month that it will eliminate 250 jobs at its information devices unit to reduce costs. The
company will close down a factory in Miyagi Prefecture making magnetic heads and transfer
some of its touchpanel production to China.
Falling prices
Falling prices have been squeezing profit at home, prompting the government to declare
last month that the country is back in deflation and push the Bank of Japan to do more to
spur the economy. The central bank released a 10 trillion yen credit program last week, a
move that Deputy Prime Minister Naoto Kan said yesterday had a "considerable impact'' on
weakening the yen.
"Even though companies are trying to secure profits by reducing costs, they continue to
struggle to increase sales amid deflation,'' said Hiromichi Shirakawa, chief Japan economist
at Credit Suisse Group AG in Tokyo. "While the nation may fall into an economic lull early
next year, it will take time before employment returns to a full-fledged recovery, even as
the government's job measures serve as a safety net.''
Yesterday's stimulus includes employment subsidies, loan guarantees and incentives to buy
energy-efficient products. Japan has compiled four spending packages since September
2008 totaling more than 29 trillion yen.
Avert recession
Hiroshi Miyazaki, chief economist at Shinkin Asset Management Co. in Tokyo, said
Hatoyama's plan will probably ensure Japan averts another recession next year while failing
to combat deflation.
Demand from Asia will be enough to sustain the export-led recovery, according to
economist Ryutaro Kono.
"The likelihood of a double-dip recession may be limited thanks largely to the solid recovery
in China and the other emerging economies of Asia,'' said Kono, chief economist at BNP
Paribas in Tokyo.
Exports fell at the slowest pace in a year in October, the Finance Ministry said yesterday.
Some companies are expanding in China to benefit from rising demand in the world's
fastest-growing major economy. Suzuki Motor Corp., Japan's third-largest motorcycle
maker, said on Dec. 1 that it will start operating a motorcycle factory in China in the first
half of 2010 after a one-year delay.
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3. Vocabulary List
English Japanese Comment, etc.
slashed
spending
recession
Gross domestic produc
median estimate
earnings
fueling concern
unveiled
stimulus package
outlook is cloudy
downward revision
expanded
Consumer spending
scaling back
market share
cut capital investment
consecutive
Exercises
1. Read and try to understand the above article
2. Explain the underlined words and find sample sentences if possible
3. Have a look at the graph "EUR / USD against JPY exchange rate" and comment on it
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