Will the press ever learn? Here’s Reuters:
Data released before the Tokyo market opened showed that Japan’s economy slipped back into recession in the July-September quarter, contracting at a 0.8 percent annualised rate, compared with the median estimate for a 0.2 percent contraction.Last year I had fun mocking press reports of a 2014 “recession” in Japan, which I believe was the 4th in 6 years. And now another. However the more sophisticated press is finally beginning to catch on. Here’s the FT:
Bright and early on Monday morning, expect to hear some gloomy news — that Japan is in recession, for the fourth time in just five years. Doom will be mongered; foes will declare it a fresh blow to Prime Minister Shinzo Abe’s “three arrows” of economic stimulus. And I will not believe a word of it.
That is not because the cries of recession will be false — even though the unemployment rate is low and falling, the corporate mood is one of cautious optimism and Japan is manifestly not entering a slump. Output is expected to fall by 0.1 per cent in the third quarter after a 0.3 per cent decline the quarter before — and, on the standard definition, two consecutive quarters of contraction equals a recession.
The trouble is this definition of a recession is anachronistic and misleading. It is an idea that no longer means what we think it does — that is, a significant decline in activity. Even worse, the way we use it causes harm, not just in Japan but also in an increasing number of advanced economies. The R-word needs a rethink.
Japan keeps entering “recessions” because its population is falling and so the economy has little potential to grow. The Bank of Japan puts trend growth at 0.5 per cent or less, compared with the US Federal Reserve’s estimate of 2 per cent for America.Actually those are both too high; trend growth is zero in Japan, and 1.2% in the US. But at least the press is starting to figure it out. That’s progress.