updated 2/16/2005 7:32:03 AM ET 2005-02-16T12:32:03

Japan's economy marked three straight quarters of contraction through the October-December period as an export boom and consumer spending dwindled. But the government and analysts played down dangers that the nation may be sinking into another deep recession.

The numbers from the Cabinet Office showed the worst reading for Japan's gross domestic product _ or the value of goods and services produced in a nation _ since the world's second largest economy recorded four straight quarters of contraction from April 2001 through March 2002.

"On the surface, three consecutive quarters of contraction technically may look like a recession, but economists must look at the basic implications for the Japanese economy," said Masaaki Kanno, chief Japan economist for J.P. Morgan Securities in Tokyo.

Reflecting a relatively widespread opinion, Kanno said the economy was set to rebound in coming months as exports pick up.

Also helping lift optimism was that one-time factors were behind the dismal numbers, such as an unusually mild winter that held back spending on clothing and a spate of typhoons that pushed up the prices of vegetables, analysts and government officials said.

During the quarter that ended Dec. 31, 2004, Japan's economy shrank 0.1 percent from the previous quarter _ or an annualized rate of 0. 5 percent _ following a 0.2 percent contraction in the April-June quarter and a 0.3 percent contraction in the July-September period, the latest figures showed.

Previous government figures showed moderate growth for the April-June and July-September quarters. The revisions made Wednesday took into account seasonal adjustments, updated data and corrected forecasts that had been off.

Although some economists technically define a recession as two or more consecutive quarters of contraction, such definitions vary, and the Japanese government takes other factors into account when declaring a recession.

"There is no change to our basic view on the economy, which is that overall, it continues to recover," Economy Minister Heizo Takenaka said, adding that the numbers continue to show an adjustment phase.

Takenaka brushed off worries that Japan may be heading to another recession. Over the last decade, Japan has managed to grow moderately over some periods but then has dipped back into recession.

"The economy must be assessed comprehensively, and we cannot look at GDP alone," Takenaka said.

The government said the economy was well on its way to mark 2.1 percent growth for the fiscal year ending March 31, 2005, and that Japan racked up steady growth based on improved domestic demand of 2.6 percent growth for the 2004 calendar year. The results for 2004 were the best since the country recorded 3.4 percent growth in 1996.

Private consumption edged down 0.3 percent in the October-December quarter. The pace diminished for export growth, which had long sustained Japan's recovery, at 1.3 percent growth for the quarter.

Wednesday's report underlines a slowdown in Japan's rebound in recent months. The Japanese economy marked solid expansion earlier this year of 1.4 percent for the January-March period. That followed 1.4 percent growth in October-December 2003.

Such numbers had been welcomed as a sign that Japan was back on track toward stable growth.

The latest numbers were worse than the average forecast from economists surveyed by Dow Jones and Nikkei for an on-quarter rise of 0.1 percent growth and 0.5 percent annualized expansion.

Mamoru Yamazaki, economist at Barclays Capital in Tokyo, said the economy was at least not in the sad shape it was several years ago as capital investment remains strong and consumer spending is likely to pick up because winter bonuses are up.

"The economy is just in a shallow recession," he said.

Copyright 2005 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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