While Japan's economy in the July-September period contracted at the sharpest rate since January-March 2011 amid a slowing global economy, "deterioration in external demand will likely continue through the October-December period as the negative impact from China is expected to remain," says RBS Securities chief Japan economist Junko Nishioka; "the Japanese economy is unlikely to return to growth until the April-June period at the earliest, since the negative effects from China are expected to remain until around mid-December and as the global economy is likely to hit a bottom in October-December." She adds, a 3.2% drop in capex also reflects sharp weakening in business sentiment; if the BOJ's December tankan also shows deterioration in corporate sentiment, the bank is expected to loosen monetary policy again by expanding asset purchases at its December meeting, Nishioka says.
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