Monthly activity data show that Japan’s economy is entering a period of contraction, after the recovery stalled at the end of the second quarter. Consumer and business spending is falling, output is dropping fast as exports plunge, and hopes for a quick recovery are being tested as forward looking indicators suggest that the bottom is not yet in sight. All-in-all, the economy is likely to contract in Q3 and we would not rule out a further contraction in Q4.
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