Japan joins the Eurozone in recession
The news was clear that the Japanese economy would soon face recession. It has been made evident that this was true after reports surfaced that Japan had suffered a negative growth in GDP of .4% in the July-September quarter and a 3.7% loss in the previous quarter. Two consecutive quarters of negative GDP growth is the standard for a defined recession.
This is very interesting news as the Japanese have been mostly out of inflationary practices to prop up their economy. The United States and the Eurozone has practically led the way in inflating currency to stimulate the economy, Japan took a hard line and has done little to curb recession. What we can gather from this is that Japan will have a very easy time bouncing back from the slowdown, it won’t take more economic activity to fight off already inflated numbers.
This also marks the first time since 2001 that Japan was in recession. Following the Japanese recession in 2001 was a similar recession in the United States. The scare today is that Japan is reliant on foreign orders for its tech products mainly from countries like the United States and those that comprise the Eurozone. A slowdown in the US and in Europe is likely be be doubly felt in Japan.
Predictions for the Japanese economy still remain comparatively strong. The Japanese economy is predicted to shrink just .1% next year while the United States is predicted to have a .9% contraction and the EU a .5% contraction. Japan may benefit from a fallout of the US automakers but the gain will be evened out by smaller orders across the board from the US.
I think with Japan and the EU now in absolute recession it is only a matter of time before the United States falls into a declared recession as well. I’m afraid that an official declaration of recession will push the markets through 2002-2003 support lines and cause a huge sell off in financial products. In any event, the market surely hasn’t bottomed and likely won’t for some time to come.
