Japan in Recession with 0.9% GDP Fall; Utilities Stocks Decline

Nigel Thomas
19 May, 2011
New York City

Stocks in Japan declined after the economy shrank at 3.7% annual rate in the fourth quarter and fell for the second quarter in a row. The two quarters of decline in a row pushed the economy in recession. Renesas Electronics reported annual net loss in line with expectations.

[R]4:30 PM Tokyo – Stocks in Japan declined after the economy shrank at 3.7% annual rate in the fourth quarter and fell for the second quarter in a row. The two quarters of decline in a row pushed the economy in recession. Renesas Electronics reported annual net loss in line with expectations.[/R]

Japan reported economy in the fourth quarter to March fell 0.9% from the previous quarter and declined for the second quarter in a row. The GDP declined the same after adjusting for prices from the previous quarter.

Technically, Japan is in recession after the economy shrank for the second quarter in a row.

The economy declined annualized 3.7% and was the second largest fall after the economy shrank at 18.3% in the first quarter to March in 2009, according to the latest data from the Cabinet Office.

The Nikkei 225 Stock Average declined 0.43% to 9,620.82 and the broader Topix index declined a fraction.

The yen closed at 116.53 against one euro and fetched 81.56 to one dollar. The yield on 10-year Japanese government bonds increased 0.5 basis points to 1.15%.

Foreign investors added 32 billion yen of stocks last week from the revised 46.6 billion in the week before according to the latest data released by the ministry of finance.

Stock Movers

Utilities declined for the fourth day in a row after Prime Minister Naoto Kan raised the prospect of splitting the power generation and distribution businesses.

Tokyo Electric Power Co dropped 8%, Tohoku Electric Power Co declined 3.2% and Chubu Electric Power Co edged 5.1% lower.

Resources linked stocks closed higher. Inpex Corp increased 1.3% to 560,000 yen and Sumitomo Metal Mining increased 0.6% to 1,323 yen.

Fanuc Ltd increased 0.7% to 12,950 yen on the speculation that rebuilding of supply chain will increase the sale of industrial robots made by the company.

Renesas Electronics declined 2.2% to 728 yen after the company denied the report published in Nikkei news that normal production will resume by October. The company’s refusal was first published by Ticker.com.

The chip maker also reported annual net loss of 115 billion yen for the year ending in March.