Japan's Weak GDP Suggests Little Hope Soon --- Quarterly Figure Off 0.8%; Economists, Officials Wary of Deflation Threat
TOKYO -- News that Japan has fallen into its longest economic contraction in five decades has led some economists and government officials to suggest that the country has nudged closer to a vicious spiral of falling prices, falling employment and falling output that would damage its economy even further.</br></br>Economic activity fell 0.8% during the April-to-June quarter from the previous quarter, the government said Friday, an annualized decline of 3.3%. And with spending by companies and consumers plummeting, there was almost no sign the situation will improve soon.</br></br>"The Japanese economy is walking along the edge of a deflationary spiral," said Taichi Sakaiya, head of the government Economic Planning Agency.</br></br>Even before the gross domestic product numbers were released Friday, the benchmark Nikkei stock index plunged more than 5% amid concern over the economy and the gyrating U.S. stock market. At the end of the morning session on Monday, the Nikkei was up 30.12 points to 13947.10. The dollar weakened almost five yen during the Asian trading day as spooked investors brought dollar investments home and cashed them in for yen. The Japanese bond market touched another record high as yields, which move in the opposite direction of prices, plunged to 0.79% on the benchmark long bond.</br></br>Japan's report on gross domestic product -- the total value of goods and services produced in the economy -- was a litany of problems that exceeded even the downbeat expectations of most private economists.