The following story, with minor variations, is being reported by most major newspapers
today. The _Washington Times_ title of the story was "Japanese Economy in Free fall";
the BBC story calls it a "dive". The story seems to indicate the vulnerabilities of an
export-led economy (or, more generally, capitalist globalization).. What will it take for
demand to be stimulated enough to turn this situation around? How is the Left in
Japan responding to the crisis?
In solidarity, Jerry
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Japanese economy shrinks by most since 1974
By Hiroko Tabuchi and Bettina Wassener The New York Times
Monday, February 16, 2009
The Japanese economy, the second largest in the world after the United States, is deteriorating at its fastest pace since the first oil crisis of the 1970s, hurt by rapidly shrinking exports and anemic spending at home in the global financial crisis.
The real gross domestic product of Japan shrank at an annual rate of 12.7 percent from October to December after contracting over the two previous quarters, the government said Monday. In the fourth quarter, GDP dropped 3.3 percent from the previous period.
It was the worst quarterly drop for Japan since its GDP contracted at an annual pace of 13.1 percent in the first three months of 1974, in a worldwide oil shortage.
Exports slumped as overseas consumers bought steadily fewer Japanese cars and electronics; capital outlays were hurt as companies halted production lines and cut investment; consumer spending also stalled as households reined in spending amid a spate of job cuts.
The downturn is exposing the vulnerability of the export-driven Japanese recovery after its so-called lost decade of growth in the 1990s. The dismal figures also place Japan smack among the worst hit in the global crisis, dwarfing economic declines in the United States and Europe.
Though Japan at first appeared relatively unscathed by the crisis, its economy has taken a hit in recent months as exporters have suffered from falling overseas demand and a stronger yen.
Since then, companies like Toyota Motor and Sony have rushed to fire workers, helping to drive the Japanese unemployment rate up to 4.4 percent in December from 3.9 percent in November, the sharpest increase in four decades.
"At one time, it looked like Japan escaped the brunt of the financial crisis," said Hideo Kumano, chief economist for the Tokyo-based Dai-Ichi Life Research Institute. "Now we see Japan's most damaged because it's so dependent on trade, which is stalling," he added.
"This shows how feeble Japan's economic fundamentals were in the first place. It's as if an already sick patient has caught influenza," Kumano said, adding that consumer spending in Japan had been weak before the effects of the financial crisis took hold.
The Japanese stock market took the data in its stride, with the benchmark Nikkei 225 index ending the Monday session down only 0.4 percent.
Government officials have hinted that Japan would consider drafting a fresh fiscal stimulus package to stem the downturn. Prime Minister Taro Aso, whose popularity ratings have plummeted even as an election approaches this year, has already promised stimulus spending worth almost �50 trillion in two packages unveiled late last year. But political bickering in a deeply divided Parliament slowed progress on the plans.
With funding yet to be secured for the second of those packages and the budget for the 2009 fiscal year yet to be passed, there is "very little prospect" of such additional measures providing a significant stimulus in the near term, said Hiromichi Shirakawa and Satoru Ogasawara, economists at Credit Suisse in Tokyo.
"The ruling coalition is now perhaps in too weak a political position to take effective action in a timely fashion," they said in a note Monday, "and it therefore seems likely that Japan's current downturn will continue until some time after the global economy begins to recover."
More worrying, Japanese banks are also showing signs of weakness, raising questions over the country's status so far as a financial safe haven. At issue are the vast shareholdings on Japanese banks' balance sheets, which have been battered during the recent market sell-off, forcing many to raise capital in recent weeks.
Even the country's top banks may need government aid this year, the Royal Bank of Scotland said in a report last week.
"Japanese banks," the report warned, "have been seen as sources of stability and liquidity in an otherwise shaky global financial system. But this may be about to change."
Meanwhile, policy makers elsewhere are also stepping up stimulus measures as they are faced with mounting evidence that the downturn in the industrialized world is hurting the export-dependent economies of the Asia-Pacific region more than initially expected.
The Indian government, presenting its interim budget Monday, said that it expected its budget deficit to swell to 5.5 percent of GDP for the fiscal year through March 2010 as a result of increased spending � and said that it would raise spending further if necessary.
The government forecast that growth in the current financial year could slow to 7.1 percent, from 9 percent or more in recent years.
Separately, data from Indonesia on Monday showed that its economy, the biggest in Southeast Asia, also slowed rapidly during the last quarter of 2008. The Indonesian economy grew 5.2 percent from a year earlier, down from 6.1 percent in the previous quarter, and less than what analysts had projected.
http://www.iht.com/articles/2009/02/16/business/16yen.php
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Received on Mon Feb 16 12:43:24 2009