Monday, February 15, 2010

Japan's Economy Grows... or Does It?

NY Times details the headline Q4 figure:

The Japanese economy grew at an annualized pace of 4.6 percent in the final quarter of 2009, preliminary numbers showed Monday, as a rebound in exports helped alleviate fears of a “double-dip” recession.

As detailed above, the growth was led by exports which jumped an astonishing 20% annualized over the period.

So how can a 4.6% increase not mean the economy actually grew?

The starting point.

Third quarter GDP was reported to have grown 4.8% back in November. As I noted back then, the number looked odd as nominal GDP was negative even with that 4.8% real growth due to deflation.

Now it appears that 4.8% growth never happened.
Tokyo has come under increasing pressure to address wild variations in its readings of gross domestic product: In the third quarter last year, the government initially said the economy had grown a robust 4.8 percent, only to revise that rate down to reflect no growth or decline. The latest numbers, the government says, have been adjusted for more accuracy.
Subtract that 4.8% growth and add in this quarter's 4.6% growth and you get... well, no growth from the level of GDP reported back in Q3.

Over the longer period, we do see a slow normalization. However, anytime nominal growth is under this much pressure in an indebted nation (a nation's debt must be paid back in nominal terms, thus with nominal growth), there is still a lot of concern going forward.

Source: ESRI


  1. Gad - you give such good data.

    How's your sense of humor working btw? Barry put up some charts of mine with a corner cutting cheat sheet relating YoY changes in Sales, GDP, etc. A poor man's pocket econonidicator and forecaster (print it and take it wonk parties). The comments are a riot - tried 3x to explain YoY and not getting thru.

    Can we do gene pool sampling distributions for folks who look at your charts and get it? :)

  2. saw that he posted it... congrats.

    i understand the confusion they may have had until your first explanation. after that, i think it isn't specifically that they don't "get it", but that they are too lazy to put in the needed 2 minutes to "get it".

  3. don't know if congrats are in order - it took two years for a friend to convince me to blog in the first place...glad now. had to think hard about letting BR post it let alone going public but it seems to have created a surge that died off once they read my real stuff :)

    think you're exactly correct - every comment/critique that followed that was quasi-rational was already answered and ignored.

    last year just at this time I was warning that the econ data was going to be worse than any headline, pundit or blogger was saying, it came out and voila' March Madness....

    the point here is about laziness and poor thinking filters on a lot of decision-makers let alone the general populace