- The Washington Times - Sunday, February 15, 2009

Japan, the world’s second-biggest economy, will likely report on Monday that its fourth-quarter output plunged at an annual rate of nearly 12 percent, according to a survey of economic forecasters.

As world demand for imported goods collapses, the export-dependent economy of Japan has been hammered. The survey forecast that Japan’s gross domestic product plummeted 11.7 percent during the October-December period. That would be three times steeper than the decline experienced in the United States during the fourth quarter.

Japan probably suffered its worst quarter since the oil shock of 1974, when Arab OPEC members slashed output in response to the October 1973 Arab-Israeli war, according to the consensus of market forecasts. The October-December period will mark the third consecutive quarterly decline in Japan’s economic output.

“Japan is likely mired in its deepest recession since it emerged from the devastation of the Second World War,” Wachovia Economics Group said in a report issued Friday.

Japanese ministries and Japan’s central bank have been reporting dreadful numbers and forecasts in recent weeks.

Exports collapsed at a record pace in December, plummeting 35 percent from December 2007 levels. It was the steepest fall on record, far surpassing November’s plunge of 27 percent.

A worldwide recession has dried up demand for Japan’s autos and electronics. Japanese exports to the United States in December were down 37 percent from year-earlier levels as auto shipments plunged more than 50 percent and audio-equipment exports declined more than 60 percent.

As exports collapsed, industrial production fell off a cliff. Japanese manufacturers cut output 9.6 percent in December, compared with November. It was the largest monthly drop since the government began compiling the data in 1953. Manufacturing production was expected to fall a further 9.1 percent in January, the government said.

Household spending dropped nearly 5 percent in December, marking the 10th consecutive month of decline. Not surprisingly, business investment is falling as well.

“The fallout from the worldwide recession has rippled through the Japanese job market,” Economy Minister Kaoru Yosano said late last month.

One after another, premier Japanese companies have been announcing massive job cuts.

NEC, the global electronics giant, will lay off 20,000 workers, half of them in Japan, where the unemployment rate jumped from 3.8 percent in November to 4.4 percent in December. It was the biggest monthly jump in more than four decades.

Sony will close 10 percent of its factories around the world and slash 8,000 jobs. Pioneer, another electronics giant, announced Friday it was slashing its work force by 10,000 employees. Toshiba is laying off 4,500 contract workers in Japan. Nissan, which said last month that it was cutting domestic auto production by 64,000 vehicles in February and March, is reducing its global work force by 20,000 jobs.

A surging yen has exacerbated the collapse in demand for Japan’s exports by making its products more expensive overseas. Because exports have been falling much faster than imports, Japan recorded trade deficits during the last three months of 2008.

Japan’s Nikkei 225 stock index closed at 7,779 Friday, nearly 50 percent below its 52-week high. The Nikkei 225 peaked at nearly 39,000 in late 1989.

And if all of this weren’t bad enough, the Wachovia report predicted that “Japan appears headed for another bout of mild deflation,” or falling prices, which were associated with Japan’s “lost decade” of the 1990s after the bursting of its stock-market and housing bubbles.

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