TAIPEI, Taiwan (TheStreet) -- Thanks to two consecutive quarters of declining growth, Japan was technically pushed into recession this week, an announcement that shocked the world's markets. But this "recession" has little street value in a country where Prime Minister Shinzo Abe's reforms are quickly reversing two decades of more severe decline.
An annualized 1.6% contraction in July through September following a 7.3% drop in the previous quarter reflects thin home buying and unsold inventory, signs of slow consumer spending on big-ticket stuff as inflation grows and wages don't. Not great for domestic auto or electronics sales.
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But those gaps in Asia's second-largest economy after China's will spare its chief drivers, the industrial export giants. Manufacturers such as U.S.-listed Mitsubishi Heavy Industries (MHVYF) as well as the electronics icons Sony (SNE) and Panasonic (PRRFY) will do fine, analysts say, because the yen is weak against the dollar, which translates to higher returns at home.
"The last quarter's number overstates weakness, because of inventory," says Marcel Thieliant, Japan economist with Capital Economics in Singapore. "We see a recovery across spending categories. I wouldn't be aware of any sector that's doing poorly."
Domestic investment has grown for four straight months. Bank credit is accelerating on appetite from smaller companies. September inflation of 3.2%, while a slap at the consumer, won't hurt those who set prices. Abe wanted things that way to relieve Japan of its sloth.
Abe is taking no chances now. The second-time prime minister said after his Cabinet Office released the would-be recession data that he would dissolve parliament Friday and hold snap elections Dec. 14, apparently to seek a stronger public mandate for continuation of his economic reforms.
Japan's GDP, hit by high prices, fell into stagnation in the 1990s after decades of strength from exports of electronics and motor vehicles. Momentum from Abe's economic policies, anchored partly by a stimulus program, is widely expected to hold through the 2020 Tokyo Olympics.
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"The economy in not in recession because private consumption and private investment are gradually increasing," argues Takeshi Minami, chief economist with Norinchukin Research Institute Co. in Tokyo. He says retail lags but that overall the economy "is not so bad."
If Japan's economy does worsen, the government will hold off a proposed hike in the 8% consumption tax to cover budget deficits. The delay of an anticipated 18 months would drive people to spend money even as wages sit flat, a double boost for business.
"Japan's recession is basically over already," says Jesper Koll, managing director of research with JPMorgan Chase Bank in Tokyo. "Chances are good that, in 2015, Japan's economy is going to hit escape velocity, unperturbed by another tax hike, as domestic demand pushes higher."
At the time of publication, the author held no positions in any of the stocks mentioned.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.