Japan is the world's second biggest economy based on GDP. It does not look terribly different from the economies in the U.S. or E.U. Oil imports are a big part of the demand and inflation dynamics. Consumer spending is the key to growth. Exports of very high-end goods and services are critical to the country's financial health. It is a nation where firms like Nintendo, Toyota (NYSE: TM) and Sony (NYSE: SNE) are cornerstones of the corporate world.
Japan had a very bad second quarter. According to the AP, "Japan's economy shrank at a 3 percent annual rate in the April-June quarter, the government said Friday in a lowered revision of an already pessimistic reading."
The consumer in Japan is deviled by higher fuel prices and food inflation due to commodities price increases. As exports in consumer electronics and autos slow, Japan is running out of industries to keep its GDP moving up.
The question about Japan is whether it is a canary in the coal mine for the U.S. In some ways the outlook in America is worse. Japan does not have a financial sector suffering the huge write-downs plaguing U.S. banks and brokerages. The government is not having to dump hundreds of billions of dollars into salvaging the country's largest financial institutions.
In other words, Japan may actually be better off economically than America.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
9-12-2008 @ 4:10PM
Kent said...
Japan is also plagued with government grid-lock as Washington. In some ways Japan is better off than we with a better social net in universal healthcare, pro-rated flat tax, and higher social security benefits ranging from $1000 -$6,800/month. Downside is a declining population and a recovery from a real estate melt-down that the citzenry still has not recovered from. They are just not spending. Japanese suffered a $17 trillion loss in property values when their bubble burst.