Japanese economy shrinks 2.3%

Japan’s economy shrank 2.3% in the fourth quarter as manufacturers were battered by the strong yen, weak export demand amid the European debt crisis and flooding in Thailand.

A drop in government spending during the quarter, due largely to political bickering delaying parliamentary approval for a 12 trillion yen (€117bn) extra budget for tsunami reconstruction, also contributed to the year-on-year decline reported today.