Posted by: Kenji Hall on March 12, 2009
Dreary news about the economy comes in big dollops these days. The latest: Revised gross domestic product (GDP) figures confirming that Japan’s economy shrank at an annualized 12.1% in the October-December quarter. That’s not as bad as the preliminary quarterly GDP data—a 12.7% contraction—announced last month.
But it doesn’t change the overall story: Things went south quickly for Japan in late 2008.
One reason that the world’s second-largest economy is in such a funk is that it got whacked hard by the downturn in the U.S., Europe and China. The result: Exports have collapsed, inventories are growing, and companies are doing what they can to scale back production, lay off unneeded staff, and put off building new factories.
It’s debatable whether Japan can do much to help itself. So far, Tokyo has approved two economic stimulus packages totaling $66 billion. That includes $20 billion of cash payments (ranging from $120 to $200 for each person) that are already getting doled out. The government and central bank have adopted creative ways to keep credit lines open to companies and banks in need. And this week, there are fresh signs that the government-run Banks’ Shareholdings Purchase Corp. is prepared to prop up the stock market by buying up to $200 billion worth of stockholdings from banks and shares in banks that are owned by companies.
And yet economists are still predicting a dismal January-March quarter. In a note to investors today, Barclays Capital forecast a 10.6% annualized fall in GDP in the first quarter of 2009 (that’s minus 2.8% in January-March, vs. October-December). The asset management firm cautioned investors not to pin their hopes on another round of public spending to boost the economy. Any further action from politicians is more likely to be aimed at winning votes in the next general election, which must be held sometime by September.
So should Japan try to do more to get consumers at home to spend or should it sit tight until its two biggest export markets, the U.S. and China, rebound? Barclays’ Kyohei Morita and Yuichiro Nagai think Japan’s trading partners will eventually pick up the slack. The duo will be watching for signs of a second-half bottoming out in Japan “with a view to the effectiveness of U.S. and Chinese fiscal policy” but also warn of possible trade protectionism overseas, a minus for Japan Inc.