Tuesday, December 9, 2008

DEEPENING WOES FOR JAPAN


In the face of the global financial meltdown it is now predicted that the recessionary situation in Japan may deepen further. The previous record was three quarters in a row, as in the last contraction seven years ago in the wake of the dot.com bust.

High oil prices were the primary cause for economic slowdown in Japan until the third quarter. But, what is currently being observed that Japanese companies are curtailing production at an unprecedented pace as demand plunges not just in the United States and Europe but also in emerging nations that had until recently weathered the global financial storm. The situation is aggravated further by the sharp appreciation in yen.


Economists have been expecting a 0.4 percent contraction in fiscal 2008/09 but that now needs to be revised down. It's hard to see at this point how the economy will return to a recovery. The sharp fall in oil price and other commodity prices should positively impact Japanese consumption but there is still time when the positive effects are felt.

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