Japan's government also warned that chances of a further slowdown in Japan's export-driven economy are increasing. "The economy is recovering at a moderate pace recently," the monthly economic report from the Cabinet Office released Friday said, The Journal reported (Subscription required).
Economist David H. Wang told BloggingStocks Friday Japan's revised assessment suggests that the U.S. economic slowdown is already being felt in Japan.
"Japan's comments are usually low-key and generalized, so what one can read into the their revision is that they are experiencing lower demand from the U.S. for Japanese exports, and that they expect more of the same for this year," Wang said. The United States is the largest buyer of Japanese exports.
Japan's GDP
To-date, Japan has not experienced any significant trade ripples from the U.S. consumer pullback that Wang estimates began in the spring 2007. Japan recorded 3.7% GDP growth in Q4 2007.
"The big issue for them is autos and electronic goods. I never use the monthly statistics because they're too short a time frame, but if the Q1 statistics show declines in these categorizes, then we know the U.S. slowdown is slowing growth in the east," Wang said.
Wang added that projections regarding Japan's economic performance during this slowdown are harder to formulate because it's the first slowdown following the rise of China as a growth engine. Previously, a U.S. slowdown has always meant a slowdown for Japan, but in the post-Cold War era China's strong growth should prop-up Japan's economy somewhat. "By how much, remains to be seen," Wang added. "We are in uncharted waters here, regarding the ability of China's consumer demand to support Japan during a U.S. slowdown."
Hence, for now, pending Q1 2008 GDP data, Wang is maintaining his 2008 Japan GDP growth estimate of 1.7-2.0%.
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