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Japan’s Economy Shrinks Less Than First Thought

Japan’s economy shrank less than previously thought in the last three months of 2015, surprising analysts. Gross domestic product contracted at an annualised rate of 1.1% for the period, compared with an earlier reading of 1.4%, official figures showed.

Japan's economy shrinks less

Analysts had been widely expecting to see an annualised contraction of 1.5% for the period.

Japan has been trying to revive its flagging economy, which has struggled with deflation for nearly 20 years.

The annualised figure is the rate at which the economy would have contracted over a full 12 months, had the December quarter been a reflection of the entire year.

Tuesday’s revised numbers showed a slightly upward revision for domestic and private demand.

On a quarter-on-quarter basis, the world’s third biggest economy shrank 0.3% compared with an earlier reading of 0.4%, cabinet numbers showed.

The contraction for the three months to December adds to a string of setbacks for the government’s economic reform policy.

Prime Minister Shinzo Abe’s plan to revive the economy – dubbed Abenomics – was introduced after his December 2013 election win.

Its aim was to combat deflation, as well as boost demand and investment.

In a surprise move last month, the Bank of Japan (BOJ) introduced a negative interest rate of -0.1%.

The rate cut into negative territory – the first ever for Japan – is designed to increase spending and investment, which should in turn boost economic growth.

But analyst said there was more work for the BOJ to do.

“We expect policymakers to lower the interest rate on excess reserves from -0.1% to -0.3% and to step up the pace of asset purchases at next week’s meeting,” said Japan economist Marcel Thieliant from Capital Economics.

Japan’s benchmark Nikkei 225 was down 0.4% to 16,848.80 in early trading.

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