There are dives, and there are dives. But not even Christian Ronaldo could match the dive seen in Japanese trade in January. Funnily enough, however, Japan’s GDP may not suffer quite as much from the decline as you may have thought.
In Japan, everything seems to be down, down and down.
Japanese exports collapsed 45.7 per cent in January, on a year ago. This takes Japanese exports to their lowest level for ten years. Not really the kind of news an economy coming out of 20 years of malaise needs.
We all know car makers are doing badly, but even so, the news from Japan really was bad. Toyota saw sales fall 57.1 per cent, Honda by 46.3 per cent, Nissan did even worse, but even those companies were positively booming in comparison to Mitsubishi and Mazda which saw sales plummet by 77.4 and 72.1 per cent respectively.
As for Japanese consumer electronic products – well, the story there is pretty dire too, with Sony reporting a massive loss recently. In times like these, we tend to spend our money on essentials, and few people would say an LCD TV is an essential item. (My son would – Ed.)
Bear this in mind. In the final quarter of last year, Japanese GDP contracted by a simply horrible 3.3 per cent, and a 13.9 per cent fall in exports during the quarter supposedly made up 3 percentage points of the fall.
So, put two and two together, or to be precise, divide 3 by 13.9 and multiply by 45.7 and you get something so horrific, you may want to switch on the latest horror flick in 3D for some light relief.
It is just that, actually, the GDP contraction may not be quite as bad as you would have thought. You may know, when GDP is calculated exports are taken as a plus item, and imports as a minus item. In the last quarter of last year, Japanese imports rose slightly, exaggerating the fall in GDP.
But in January, imports fell too – down 31.7 per cent by value. Capital Economics has dived into the data, and worked out that most of the fall in imports can be explained by cheaper commodity prices. So maybe the hit on Japan’s GDP won’t be quite as bad as you might think.
Then again, it wasn’t supposed to be like this. Economists had thought Japan and Germany would come out of this crisis less scarred than the rest. So far, these two economies have been the worst afflicted of all the world’s larger economies.
Now economists are saying that Germany and Japan will recover more quickly than the rest. But it is hard to see how this can happen. Both economies got themselves into a situation in which they were over-reliant on Anglo-Saxon excess. It seems that the only true solution to this crisis lies in seeing the Anglo-Saxon economies export more, and Germany and Japan importing more. It is hard to see that happening for some time.
© Investment & Business News 2013