Press Takes to Calling Japan's Most Recent Very Real Recession 'Technical'

So when is a recession not a genuine recession? Apparently when it's "technical."

Unfortunately, the term "technical recession" appears to be well on the way to devolving into what has long been considered the real definition of a recession for the purpose of discounting its validity.

The traditional definition of "recession" at Investor Words is: "A period of general economic decline; typically defined as a decline in GDP for two or more consecutive quarters."

Unfortunately, U.S policymakers and their friends in the media have long since acquiesced to having a collection of "experts" (i.e., academics and economists) at the National Bureau of Economic Research (NBER) determine for public consumption when recessions begin and end. To the surprise of no one who understands that the economic establishment's primary concern is defending Keynesianism at all costs, the NBER has been particularly adept at defining recessions into periods of positive growth which just so happen to have occurred during Republican presidential administrations, and ending recessions even when the economy is struggling mightily during Democratic administrations. Examples:

  • In 2001, contrary to common belief, there was no two-quarter period of contraction, and therefore no recession as traditionally defined. Yet NBER claims there was a recession from March through November of that year.
  • In 2008, the economy contracted during the fourth quarter and expanded during the second. Four consecutive quarters of contraction followed. Despite this, almost everybody (apparently except for yours truly) blindly accepts NBER's extremely shaky determination that the recession began in December 2007.
  • NBER, which used job losses as part of its justification for including the first half of 2008 in the most recent recession, declared the recession's end as June 2009, even though growth during that year's third quarter was weak (an annualized 1.3 percent) and the economy lost 769,000 seasonally adjusted payroll jobs (vs. 619,000 in six months during, as defined by them, the recessionary first half of 2008).

The only direct discussion of a "technical recession" I could quickly find is at what appears be an Australian web page. Note how the definition used is the same as the traditional definition (note that the author appears quite displeased):

So what is a technical recession and why should we care? No one really knows which boffin coined it but it’s largely accepted wisdom that a technical recession is when you have two quarters in a row of economic contraction i.e. our economy shrinks and things go south.

"Boffin" is British slang for "a science or technical expert." It doesn't seem to be a compliment in this instance.

This takes us to Japan, the press's treatment of its most recent recession, and what appears to be an attempt to employ "technical recession" as an excuse-making gambit.

The Land of the Rising Sun's economy has been struggling even more than usual of late. After growing robustly in the first quarter of last year (1.6 percent actual, i.e., not annualized) as a result of binge buying by consumers getting as much purchasing done as they could in advance of a steep sales tax increase which took effect on April 1, Japan's economy contracted twice, sharply in the second quarter (-1.9 percent actual) and again, but at a slower rate, in the third (-0.4 percent).

A couple of months ago, out of the blue, there appeared a term I had never seen before, one which is also not present at the exhaustive collection of terms found at Investor Words: "technical recession."

The Associated Press has used the term at least times since mid-February (the first two listings are duplicates):


Like most of the rest of the world, Japan doesn't have a set of academics and economists deciding when recessions occur; they have simply used the traditional definition.

This apparently isn't sitting well with the press, which really doesn't want to admit that Japan's twenty-plus year Keynesian calamity has seriously damaged what was once one of the world's most envied economic powerhouses. Rather than come to its senses, the country has recently gone even more extremely overboard with deficit spending and "quantitative easing," with predictably bad results.

The AP and much of the rest of the world seems to be trying to tell us that "Well yeah, Japan had two quarters in a row of contraction, but that doesn't count because the second quarter's sharp negativity was solely the result of the sales tax taking effect. So we're going to call it a 'technical recession.'"

Technical, schmechnical.

The problem with this gambit, as seen below, is that the contraction in the quarter after the sales increase was greater than the previous quarter's growth:


The negatives in Japan's economy clearly go beyond the sales tax. If its impact was the only problem, the second quarter's growth should have more than offset the first-quarter's contraction. It didn't.

Thus, Japan had a genuine recession during the middle of last year. Calling it "technical" until one is blue in the face won't change that.

If the U.S. economy has two quarters of contraction to start off this year — a possibility that can't be ruled out, given that the first quarter growth seems an even bet to be negative, and job growth appears to be stalling in the current quarter — expect to see the term "technical recession" frequently used in an attempt to discount its importance.

Cross-posted at

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