Japan's economy contracts 1.1% in final quarter of 2015

People walk at an office building at a business district in Tokyo, Japan, on Feb 29, 2016.
People walk at an office building at a business district in Tokyo, Japan, on Feb 29, 2016. PHOTO: REUTERS

TOKYO (Bloomberg) - Japan's economy contracted in the final quarter of 2015, according to revised government data that underscores growing concern that Prime Minister Shinzo Abe's reflation program is falling short of expectations.

The gross domestic product shrank an annualized 1.1 per cent in the three months ended Dec 31, better than the 1.4 per cent contraction reported last month, according to revised data from the Cabinet Office released Tuesday.

The median forecast of 29 economists surveyed by Bloomberg was for a 1.5 per cent contraction.

The slightly less shallow contraction was affected by a modest upward revision in business spending and came before turmoil erupted in global markets this year.

That has pushed the yen 6 per cent higher in 2016, threatening to hurt exporters' profits and dimming the outlook for corporate spending.

"A contraction is a contraction, meaning no change to the picture that Japan's economy was weak," Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance Co. in Tokyo, said before the report was released.

"Japan's economic outlook is cloudy because there's no driver to support a recovery."

The slowdown in China - Japan's largest trading partner - and the appreciation in the currency are concerns for companies and may erode their record profits.

Panasonic Corp cut its profit forecast for the year ending in March as sales of products including air conditioners fell in China.

Hitachi Ltd reduced its full-year profit forecast on slower sales of construction machinery in China and reduced demand from oil- producing nations hurt by falling energy prices. Investors sometimes have been led astray by GDP data in Japan.

Initial gross domestic product data showed Japan falling into a recession in the third quarter of 2015 before being revised to show expansion.