Japan’s economy is in a worse state than feared.
Gross domestic product there shrank more than expected in the final three months of last year. Paradoxically that pushed up share prices on Monday as investors hope for more central bank stimulus, even though the feeling among analysts is that the Bank of Japan is running out of options.
GDP slumped 1.4 percent between October and December 2015 compared with the same period a year earlier.
Consumer spending, which makes up 60 percent of GDP, fell 0.8 percent.
Exports were down 0.9 percent in the same period after rising 2.6 percent in the previous quarter.
The numbers underscore the challenges Japan’s government faces in dragging the world’s third-largest economy out of stagnation amidst market turmoil and weakening economies in the region.
Exports to emerging markets are failing to gain enough momentum to make up for soft domestic demand.
“Private consumption is especially weak. The economy is at a standstill,” said Junko Nishioka, chief economist at Sumitomo Mitsui Banking.
“It’s a matter of time before the the Bank of Japan (BoJ) and the government will take additional stimulus measures,” she said, predicting the central bank will ease policy again as early as next month.
Last month the BoJ cut a benchmark interest rate below zero, stunning investors with another bold effort to stimulate growth.
But the shock move has failed to boost Tokyo stock prices or weaken the yen as Japanese markets remained at the mercy of a global sell-off of shares.
Analysts doubt whether the economy will gain momentum in coming months, with the recent market turbulence and slowing Chinese growth clouding the outlook for corporate profits.