Japan, the world's second largest economy, has officially fallen into a recession (pdf). Japan's gross domestic product contracted 0.4% in Q3 after declining 3.7% in Q2, the office said.
The contraction means that two of the world's three major economies, Japan and the Europe's euro zone, are now in recession. Last week, the 15-nation euro zone reported a 0.2% contraction for Q3 following a similar decline for Q2.
Economist David H. Wang told BloggingStocks Monday Japan has fared relatively well compared to the United States and Europe at the outset of the global financial crisis as Japan's banks have less exposure to toxic assets. However, that does not mean that Japan will not be affected by slowing U.S. demand for consumer goods, some of which are Japanese exports.
"Japan is now seeing the indirect effect of the financial crisis, an export sales slowdown," Wang said. "While the U.S. situation is serious, Japan's is not pretty either. Japan is more export-dependent than the U.S. and its aging population means domestic demand will remain weak. As a result, Japan's recession could be as long or longer than the U.S.'s recession."
Further, with the U.S. economy most likely in recession -- 96% of economists surveyed by the National Association for Business Economics believe the U.S. is contracting -- Wang said all three, major, developed world economies will fall into a recession for the first time since 1974-75, a condition that all but ensures a global recession.
"The main macroeconomic difference between1974-75 and today is commercial activity in emerging markets, China, India, Russia and Brazil. However, they cannot maintain adequate global growth in the face of recessions in the U.S., Europe, and Japan," Wang said. "China is illustrative. China faces reduced demand for exports to the U.S. and Japan and that downtrend could cut GDP to 7% or even 6%, from double-digit GDP growth."
Economic Analysis: Economist Wang added that Japan has already passed a $51.5 billion fiscal stimulus package, but more will be needed to get the world's major economies back on the growth track. For Japan, Wang recommend another $200 billion in fiscal stimulus; Europe, $500 billion; the U.S., $600 billion.
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Reader Comments (Page 1 of 1)
11-17-2008 @ 11:48AM
BHarrison said...
As simplistic as it sounds, the global economy has been brought ot its knees because of President Bush and Congress allowing the irresponsible operation of our economy (and FRAUD) due to the failure to require SIMPLE "COMMON SENSE" regulations requiring that mortgage loan applicants be required to be fully pre-quailied for the loans that they applied for . . . staggeringly amazing!
Then they allowed all of this to be expanded into economic chaos, and massive FRAUDS of pyramid and Ponzi schemes. The "bottom line" is that our government is responsible for this GLOBAL economic debacle. That's doesn't exactly evoke confidence in Congress' ability to lead and remedy the recovery efforts, does it?