Tuesday, May 19, 2009

Japanese Economy Crashes... Hard

Can't wait to hear how this awful release contained some green shoots. My guess is "this marks a bottom", but don't count out "imports were down". Bloomberg details:

Japan’s economy shrank at a record 15.2 percent annual pace last quarter as exports collapsed and consumers and businesses cut spending.

The contraction followed a revised fourth-quarter drop of 14.4 percent, the Cabinet Office said today in Tokyo. Gross domestic product fell 3.5 percent in the year ended March 31, the most since records began in 1955, confirming that the recession is Japan’s worst in the postwar era.

Exports plunged an unprecedented 26 percent last quarter, forcing companies from Toyota Motor Corp. to Hitachi Ltd. to cut production, workers and wages. Stocks have gained 32 percent since reaching 26-year low in March on speculation worldwide interest-rate reductions and spending by governments will halt the slide in the world’s second-largest economy.
Two areas of "growth" were imports (or the lack thereof - i.e. addition by less subtraction) and government consumption (well... sorta - it's that small light blue speck).

My overall take... whenever exports detract 10% and 15%, in back to back quarters, from an "export nation", things are worrisome.

Update: The Financial Times went with Green Shoot #1 (hat tip Naked Capitalism):
However, with government spending growing, inventories falling and exports expected to stabilise after falling a record 26 per cent between January and March, many analysts believe that the worst is over and the economy could already have returned to growth in the current quarter.

Drastic production cuts by Japanese manufacturers have finally succeeded in outpacing the collapse in demand, Wednesday’s data showed, with destocking of inventories contributing a negative 0.3 percentage points to GDP growth in the first quarter.

While such inventory reduction made the headline GDP figure look even worse, it means that companies are making progress in clearing their decks and should soon be able to increase production to meet actual demand.
Source: esri.cao.go.jp