Japan’s economy shrunk by a huge 3.3% in the 4th quarter of 2008, as the recession gripping Australia’s largest export market, intensified.
That was larger than market estimates of a 3.1% fall in the quarter that saw a string of Japanese industrial giants from Toyota, to Nissan, Panasonic, NEC, Hitachi and Sony forced to cut tens of thousands of jobs in Japan and worldwide after their businesses plunged into deep losses.
The news underlines the extent of the problem confronting the world’s second largest economy.
Analysts said things could still get worse as the global economic downturn crushes demand for Japanese cars, electronics and other goods, forcing companies to slash jobs and investment.
There are signs that unsold stocks of goods and products are high (as in the US 4th quarter figures), which suggests another tough quarter for business as these are reduced.
A senior Japanese Government minister yesterday said the slump is the worst since the second world war and is far tougher than the first oil shock driven slump in the 1970s.
"This is the worst ever crisis in the post-war era. There is no doubt about it," Economic and Fiscal Policy Minister Kaoru Yosano was quoted by newsagencies as saying.
"The Japanese economy, whose growth is heavily dependent on exports of automobiles, machinery, and IT equipment, was literally battered" by the global downturn, he told a news conference.
The extent of the slump is underlined by figures compiled by Bloomberg suggesting that Toyota’s car production will more than halve this quarter as it battles to keep stocks and costs under control.
Japan is our biggest export market and it is undergoing the worst economic contraction among the world’s major economies: cutbacks by the likes of Toyota are very bad news for Australian iron ore, coal and other exports. It is being replicated by competitors and other big industrial firms, while retail sales are continuing to decline.
According to a preliminary report from the Japanese cabinet office the performance left growth down an annualised 12.7% against market estimated of 11.7%.
Gross domestic product contracted by 3.3% from the September quarter. The big slide in the December quarter was its second-worst in modern times, behind only a 3.4% contraction in 1974, after the first Middle East oil shock.
Unlike China and South Korea where the respective governments have launched stimulus packages, at least three similar policy ideas have been announced and detailed, but have yet to be implemented as the current government loses its nerve in the face of falling popularity and an unwillingness to go to the polls.
The Japanese government has no idea.
Yesterday’s figures sparked more talk of a stimulus package, but it has been evident now for a month that the 4th quarter figures were going to be bad. And yet the government of Prime Minister Taro Aso couldn’t organise another spending announcement to try and counter the terrible figures and their impact.
In fact prime Minister Aso is now one of the worst thought of leaders in recent Japanese history with an approval rating of just 9%.
Aso’s approval rating fell to 9.7 % from 17.4% since the Mori-led government back in 2001, in the previous, mild, recession.
That unpopularity has infected his government, which won’t fight the opposition for control of any spending package, but merely tries to give the impression of doing something.
At least countries from Australia to China, Germany, the US, Spain and South Korea have introduced spending boosts.
Asia is now more deeply scarred by the credit crunch and global recession than either Europe or the US.
China is at least growing: annual growth was put at 6.8% in the 4th quarter (but there was no growth from the 3rd to the 4th quarters).
But growth in Japan, South Korea, Taiwan, Hong Kong and Singapore is plunging as demand dries up for their mix of high end, high value manufactured goods, such as cars, computers, consumer electronics, pharmaceuticals and a growing list of services.
It was the largest fall in Japanese growth since the oil shock in 1974 and exceeds the annual 3.8% fall in US growth in the first quarter (a figure that will be revised upwards next week in the second estimate).
It was a bigger fall than the 3.1% contraction expected by economists and marked the third consecutive quarter of contraction – the first time this has happened in Japan in seven years.
In July-September, the Japanese economy shrank 0.6%, so the pace of declined accelerated at a pace not thought possible until early last month when poor figures on car sales, exports and especially industrial production for November, then December started emerging.
Exports have fallen to every major region, especially China. Industrial orders are sharply lower, as are exports (off more than 35% in the latest month)
Japanese unemployment jumped to 4.4% in December from 3.9%, the biggest rise in 27 years. Prices are falling as deflation sets in; retail sales are falling as well, as is consumer confidence.
Japan’s 4th quarter plunge was much steeper than the eurozone’s nasty 1.5% fall in the last quarter of 2008, led into the red by Germany’s 2.1% fall, for reasons similar to that for Japan: falling exports, production and the drying up of international orders.
In London overnight, the country’s key employer group forecast that the economy would contract by more than 3% this year and it will suffer the deepest recession in 30 years.
