Monday, February 9, 2009

Japanese Economy Decelerates

Hakuin Ekaku (1685 to 1768) drawing of Bodidharma, who brought Zen Buddhism to China, with Japanese calligraphy: “Point directly at the human mind, see one's nature, and become Buddha.”

In the aptly-named article Japan faces 'unimaginable' contraction the Financial Times announced several bad items of news about the Japanese economy today.

Kazuo Momma, head of the research and statistics department at the Bank of Japan, gave a speech today in which he provided an advance impression of Japan's fourth quarter 2008 economic product data, which are scheduled to be announced next week. Momma said "From October to December the scale of negative growth may have been unimaginable -- and we have to consider the possibility that there could be even greater decline between January and March."

Polls of economists suggest that the fourth quarter data may indeed be "unimaginable". They predict a fall in GDP of more than 3% from the previous quarter, or a decline of more than 10% at an annualized rate. A separate report by Tokyo Shoko Research said that the number of corporate bankruptcies in Japan rose 16% year-over-year in January, and total debts of failed companies rose 44% year over year.

One of the themes recently espoused in this blog is that many other nations are more vulnerable to the economic slowdown than is the US, and here we have evidence of this thesis from Japan. This is bad news for the US as for the rest of the world, because all economies are simultaneously providing decelerating feedback to each other.
Ito Jakuchu (1716-1800), Chrysanthemums by a Stream with Rocks