Japan's economy contracted more than the government initially estimated last quarter after figures showed businesses cut spending. Japan's GDP shrank an annualized 3% in the three months ended June 30, more than the 2.4% drop reported last month. Stalled growth and the fastest inflation in a decade have created a dilemma for the Bank of Japan, which will probably have to keep interest rates unchanged for the rest of the year. At 0.5%, Japan's key rate is the lowest among major economies. Slumping US demand has forced exporters including Toyota to cut production and jobs. Markets outside the US are also deteriorating - the European economy shrank for the first time in almost a decade last quarter.
- With rising inflation and a shrinking economy, Japan is in full-blown stagflation mode. The entire world is going into stagflation mode, and both the "stag" and the "flation" are going to get worse. It doesn't help that Japan is a large importer of crude oil and natural gas via LNG. When the prices of these commodities rebound, prices will take off as global hyperinflation kicks in.