Japan's economy appears on the brink of yet another recession -- the fourth in a decade. The nation's gross domestic product -- the total value of goods and services produced at home -- remained flat in real terms, not including price effects, in the first three months of the year, according to data released Friday by the Cabinet Office. To be more exact, first-quarter GDP grew 0.006 percent from the previous quarter, which translates to an annual rate of 0.026 percent.
However, real GDP for all of fiscal 2002, which ended March 31, increased 1.6 percent from the year before, posting the first year-on-year growth in two years. But nominal GDP, which includes effects of falling prices, declined 0.7 percent, recording two consecutive years of negative growth. Nominal GDP -- which is probably more important than real GDP in times of deflation -- shrank to 499.4 trillion yen, slipping below 500 trillion yen for the first time in eight years.
Deflation -- a continuous decline in the prices of goods and services -- became more pronounced in the January-March quarter. The GDP deflator, an overall price index, fell as much as 3.5 percent from a year earlier, the steepest drop ever. Quarter to quarter, real GDP growth slowed to 1.3 percent in April-June 2002, 0.8 percent in July-September, 0.5 percent in October-December, and ground to a halt in January-March 2003.