Posts Tagged ‘japan’

Japan’s Economy Shrinks A Record 15.2% – BusinessWeek.

On the one hand, a 15.2% annualized drop is…staggering.  Mind-blowing.  Mind-numbing.  On the other hand, the article makes a good point in that everyone expected a huge hit since the country has responded to expected decline in exports very aggressively.  They have closed plants, not just decreased production.  

Also, the current account, which is roughly defined as exports-imports, has dramatically shifted for Japan.  Before, they were likely running a CA surplus, since so many of their products are exported to the US, China, etc.  But suddenly those exports have dropped and while they still might be in surplus (I don’t know, to be honest) they might also be in a slight deficit now.  When a country is trying to balance its internal monetary and fiscal controls and its desired level of the current account (which of course impacts the internal economy, since a CA surplus means higher production and employment, etc), changes in the CA can be really devastating to a country that has relied upon a surplus for so long.

Still, 15.2% is crazy.

Japans economy shrank an annualized 12.1% in the fourth quarter – MarketWatch .

A 12.1% contraction of one of the world’s largest economies is absurd and frightening.  In comparison, our Q4 contraction was about 6%.  Wow.

Japan reconsidered – Paul Krugman Blog – NYTimes.com.

Last night, I did a presentation on part of a case I did in my macroeconomics class about the current economic crisis.  My team’s part was comparing the Great Depression and Japan’s “Lost Decade” with the current situation.  A rather big topic.  

Japan’s crisis is remarkably similar on a number of fronts to our current situation.  One notable aspect, touched slightly upon by Krugman in the linked post, is that of sluggish response.  In particular, it took the whole decade before someone said “let’s just admit the banks are in trouble and do a massive recapitalization.  That was a big move.  

Krugman is concerned that our situation might end up a lot worse than a decade that many economists consider “lost.”  That’s a bad thing to be thinking.  Someone in class last night asked me whether I thought, considering all of the new things the Fed is doing (credit easing, etc) under Bernanke and the stimulus package and possible additional efforts, we were going to get out of this.

Honestly?  If we don’t address the bank issue, I am not sure we’ll see the trough of this recession this year.  Yes, this entire year.  At best, I’m thinking mid-year before we see something.  That’s a while from now…