Japan’s Streets Still Gloomy

I’m hearing lots of chatter about Asia’s improving economy, with China supposedly leading the globe out of recession and things looking up in Japan.

The latest economic data out of Japan show that factory production rose 1.6% in March, which was better than expected. That’s the first gain in six months, so pundits immediately began saying that the decline in production and exports is slowly abating.

If so, then slowly is the key word. On the street, nobody is singing happy tunes. I attended a dinner party last night in Sano and spoke with a man who owns retail shops in the countryside and in Tokyo. He said things have never been worse, and that’s after he closed several shops to cut costs. If it keeps going like this much longer, he told me, the rough finances are going to stop just closing shops and start changing his family’s lifestyle. He looked very worried.

The production drop may be slowing, or maybe the 1.6% blip upward in March was just a hiccup like U.S. housing starts in February. Remember those? They soared 17% and forecasters got excited. The doldrums are over, they said. It was supposed to be a V-shaped recovery after all. It wasn’t. Housing starts in March dropped 11% and inventories were still backed up 12 months. Year-over-year, housing starts dropped at an annual pace of 48.4%. Not much of a recovery.

With Japan’s production, the year-over-year measure may be more telling than the one-month report. YoY production fell 35%. That’s what people are talking about here. Many of them are working fewer hours at their main job and supplementing their income with part-time jobs. That’s still going on. There’s no sign on the street that people are returning to normal work schedules.

So, be skeptical of the Japanese recovery angle. It may look like recovery to economists, but not to people who work for a living — or wish they could.

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