You think things are bad in America? You should see what we’re going through here in Japan. For the past few years, commentators have described Japan’s economy as closing in on two decades of recession. Two decades! That was bad enough, but on Monday the government reported that the economy is now performing at its worst level in three decades. A decade here, a decade there, and pretty soon you’re talking about a long time.
“There’s no doubt that the economy is in its worst state in the postwar period,” said Kaoru Yosano, minister of economic and fiscal policy.
Prime Minister Taro Aso is even less popular than former U.S. President George W. Bush was in the twilight of his ignominious eight-years. Aso has less than 10% support. He can’t get anything right, all the way down to making so many mistakes when reading Japanese kanji that he’s become a rallying cry for teachers trying to motivate students: “You don’t want to end up an ignoramus like the prime minister, do you?” Even foreigners fairly new to the language catch his mistakes.
Aso’s unpopularity is crimping his ability to do anything meaningful for the economy — not that he had anything brilliant on deck back when 40% approval was like being a Beatle. His big plan? Sending everybody in the country $130. You may recall what wonders that approach worked in America last spring. Even worse, though, is that Aso has spent the last several months debating publicly whether he should personally receive $130, too, and is now proud to be leaning in favor of getting the cash. Way to focus on what matters.
As Prime Minister No-Can-Read anguished over the decision to receive or not receive his wad of cash, the economy disintegrated. The yen strengthened and other countries stopped buying Japanese products. So Japan sells less than it used to, and when it translates foreign money back to yen it becomes less than it used to become. That’s a double whammy, alright.
Japan’s economy shrank at an annual pace of 12.7% last quarter. Exports during the quarter fell a record 13.9% because other countries stopped buying cars and electronics, two of Japan’s main product categories. Marquee players like Toyota and Sony posted their worst losses ever, cut production to the bone in many factories, and are laying people off. The export part of Japan’s GDP fell at an annualized 45% last quarter. Worst of all, most economists don’t see recovery any sooner than 2010, and are expecting the current quarter to be even bloodier than last.
Here in Sano, where I live and work about an hour north of Tokyo, factories have cut back from typical schedules of 24-26 days per month to about 15. That’s less than a 4-day work week for employees lucky enough to still be employees. They’re being encouraged to supplement their income with part-time jobs. My favorite ramen shops are now staffed with “salary men” doing jobs that used to be done by high school students and housewives.
The Bank of Japan expects GDP to contract for two years in a row, and for the economy to slip into a deflationary spiral. That’s likely for six reasons:
- The strength of the yen against other major currencies
- Falling commodity prices since last July
- The domestic recession
- Stagnant exports due to the global downturn
- Disappearing domestic demand
- Falling wages
If the world’s second-largest economy looks like that, how soon do you think the global economy will be humming again?
