A Ray Of Hope In Japan

Some experts on the Japanese economy, the world’s second largest, compared the current recession to the nation’s “lost decade” of the 1990s when real estate and stock market prices plunged and the country went through a long bout of deflation and no growth.

Japan’s economic figures were setting up the same way late last year and early this. Japanese reliance on exports, falling consumer spending, and rising oil prices made it appear that the country was facing higher hurdles to an economic recovery than the US or EU. Deflation did become a problem as 2009 progressed. It looked like Japan was sinking toward a long, dark period of recession.

But Japan’s GDP actually rose in the second quarter, based on new numbers on the economy, up .9%. Some economists had hoped for slightly better, but the fact that the number was positive at all is a bit of a miracle. Now, economists are left to ponder whether the jump was an anomaly or the beginning of a trend.

There is some real hope for Japan this time around. It looks like the status of the economies in the US, Germany, and France are brightening. All are significant importers of Japanese goods. The advance of crude prices seems to have topped at $70 and may keep drifting down toward $60. If the US stimulus package begins to take hold in the latter part of this year, Japan should expect another step-up in its export figures.

Japan may be a better gauge of the global economy than the US. It does not have a tremendous stimulus package, but that means its deficit is not likely to rise sharply during the next decade. Japan does not rely on consumer spending quite as much as America does. Exports have remained at the core of its economic engine for decades.

Japan’s economy was expected to under perform those of other developed nations. The fact that it has rebounded so quickly is a good omen for a GDP improvement on a much larger, global scale.

Douglas A. McIntyre