Concern over the state of the global economy mounted this week, with the latest data from Japan looking particularly sickly. Merchandise exports fell at the fastest rate since last year’s tsunami in September. They were down 10.3% year-on-year. Exports to the EU were over 20% below last year’s level.
The Bank of Japan’s (BoJ) latest quarterly regional economic report showed that activity softened in eight of nine regions. This marks the worst such report since early 2009. Factory output has declined to a 15-month low. The latest Tankan survey of large manufacturers showed that conditions have deteriorated.
What the commentators said
Japan looks set for its fourth recession in a decade and a half. Deutsche Bank pointed out that its index of leading indicators has fallen for four months in a row, hitherto a reliable sign of economic contraction. The boost to GDP from rebuilding after last year’s tsunami has faded and consumption is weak. Wages have been contracting and households brought forward spending to take advantage of an eco-car subsidy that expired in September.
In the meantime, the strength of the yen and weakness in America and Europe have dented trade. Then there’s the “painful toll” on Japanese firms exacted by Chinese boycotts, noted Emily Ford in The Times. Toyota’s sales in China declined by almost 50% last month.
The government has said it wants to launch a stimulus package, said Capital Economics. But even if it can find the money, which is unlikely, it would come too late to temper the impact of the global downturn. “More needs to be done to deregulate the economy and support private sector growth potential. On this there is plenty [the government] can do.”
Similarly, more money printing by the BoJ isn’t likely to work miracles. The cost of credit has fallen, “but the problem remains a shortage of demand rather than a shortage of supply”. Two decades on, Japan has yet fully to shake off the hangover from its credit bubble.