- The Washington Times - Saturday, December 27, 2008

The world’s second-largest economy slipped deeper into recession in November as industrial production in Japan plunged by a record amount and unemployment increased amid falling wages. For the ninth consecutive month, Japan’s households reduced their spending in November.

Industrial production collapsed by 8.1 percent last month, led by big output cuts by Japanese automakers, which are facing rapidly falling demand domestically and in Europe and the United States. It was the biggest drop in factory output since the government began keeping records in 1953, and it followed a 3.1 percent decline in October.

A survey of businesses projected additional output cuts of 8 percent in December and 2.1 percent in January. If those cuts are realized, Japanese industrial production will have plunged by nearly 25 percent in just four months.

“The public, businesspeople and politicians - we all must give our all so that the economy would not nose-dive even below its lowest point,” said Kaoru Yosano, the economy minister, after the dismal industrial output numbers were released. “The government, companies and politicians need to make an effort to keep the economy from falling apart next year.”

Meanwhile, unemployment increased to 3.9 percent last month from 3.7 percent in October.

Because of declining overtime and shrinking bonuses, monthly wages fell 1.9 percent from a year earlier, marking the ninth consecutive month of falling household spending.

The dismal economic numbers released Friday followed a report earlier in the week that revealed Japanese exports had plummeted in November by 27 percent compared to a year ago. That was the biggest drop for Japan’s export-dependent economy since the government began reporting comparable data in 1980.

As badly as 2008 is ending, Morgan Stanley’s main scenario for Japan in 2009 calls for “the worst recession in the post-World War II era.” Even the investment bank’s “bullish” scenario projects “a tepid recovery in 2010.” Japan’s economy began contracting during the second quarter of this year. After declining during the fourth quarter, Japan’s gross domestic product should fall 2 percent next year, Morgan Stanley projected.

As a result of the weakening economy, a soaring yen and tumbling costs for oil and other commodities, consumer price inflation has significantly decelerated in recent months. Some economists now fear a return of debilitating deflation, or steadily declining consumer prices.

Bouts of deflation earlier this decade prevented the Japanese economy from rapidly and robustly recovering from the numerous recessions that followed the bursting of the nation’s property and stock-market bubbles nearly two decades ago.

Indeed, the Nikkei 225 stock average, which increased 1.6 percent Friday following all the bad news, closed at 8,740, which is about 78 percent below its peak in 1989 of nearly 39,000. For 2008, the Nikkei is down more than 40 percent.

For the world’s advanced economies, 2009 is shaping up to be an unprecedented year.

“In advanced economies,” which include the United States, Japan, Europe, Canada and the newly industrialized Asian countries like South Korea and Taiwan, “[economic] output is forecast to contract on a full-year basis in 2009, the first such fall in the post-war period,” the International Monetary Fund said in its latest projection.

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