Three Peas in a Pod
Sharing the pain
Japan
As recently as three months ago, the International Monetary Fund (IMF) forecast that Japan’s economy would outpace that of the United States and Europe in 2009. After all—so the story went—Japan had largely avoided the U.S. housing and credit bust that precipitated the global recession . . . whoops.
More recent IMF projections suggest that Japan’s economy is now the weakest in the developed world, with a deeper recession under way than in the United States or Europe. The IMF now suggests that Japan’s economy will shrink 2.6% this year, versus contractions of 1.6% and 2%, respectively, in the United States and Europe (Bloomberg.com).
The problems are primarily two: weak exports and a strong currency.
Japan’s dependence on exports to the United States and around the world is a major problem in a world where economic growth and exports are in decline. A good example is Toyota, viewed by many as the world’s premiere automaker. Toyota management in recent weeks forecast its first loss in 70 years during 2009—and slashed production in Japan by half in the current quarter.
A stronger yen has also hurt export opportunities for the Japanese. A roughly 20% rise in the yen’s value versus other major currencies during the past year simply makes Japanese-produced cars, electronic equipment, and most everything else more expensive around the globe.
Published February 19, 2009
Jeff Thredgold, CSP
President, Thredgold Economic Associates
Republished with permission from Thredgold Economic Associates. Original article published on February 18, 2009, in Tea Leaf, a guide to understanding today's economy and financial markets.
Jeff Thredgold is president of Thredgold Economic Associates, an economic consulting and professional speaking firm based in Salt Lake City, Utah. He is an economist for Vectra Bank Colorado and the only economist in the world to have received the designation of Certified Speaking Professional (CSP).
