Raw Japan

Slices of Japanese business, politics and life

Spring blossoms or just a break from winter?

May 20, 2009

It’s official: Japan’s economy shrivelled at a record pace in the first quarter.

Needless to say the 4.0 percent contraction in GDP (an annual rate of 15.2 percent, if you speak American) from January to March was not pretty — especially when you see that the pain has spread from Japan’s big autos and tech factories to the broader economy.JAPAN-ECONOMY/

Much has been written about Japan’s heavy dependence on exports from its powerful manufacturers and how the slide in orders from the United States and Europe has forced factories to curb output, lay off staff and slash capital investment.

But that GDP figure is looking backwards to a time we know was bleak for the economy.

Just as the West is looking for signs of “green shoots” of new growth to see if the worst is over, so Japan is looking to see if its economy is now starting to sprout cherry blossoms — the traditional sign of spring in this part of the world.

The good news is that companies are starting to see a tentative pick-up in sales.

A senior executive of Konica Minolta, which makes key parts for LCD TVs as well as its brand name photocopiers, says his firm hit bottom in January and has seen some recovery since then. But he adds it is not really clear yet whether this is sustainable.

gdp-graphicThe recovery seen in recent months, Shoei Yamana says, is due to companies replenishing their stocks after running them down in a hurry when business turned south late last year.

The real recovery will only come when final-buyer demand for Japan’s cars, TVs and other machinery returns.

“We have not really seen any strength in end-user demand for large-screen TVs in Europe and the United States. If panel makers turn bullish and start flooding the market again, the industry might have to go right back to the inventory adjustment phase,” Shoei Yamana told the Reuters Global Technology Summit in Tokyo.

How well government stimulus efforts in China, Europe, the United States and so on succeed in getting consumers to shop will play a key role here in the short term.

Longer term, Japan’s ageing consumers are unlikely to ramp up spending unless unemployment falls and wages start rising again.

That suggests the fate of Japan, the world’s No.2 economy, will remain in the hands of Toyota, Panasonic and other big exporters for quite a bit longer to come.

Photo credit: REUTERS/Toru Hanai; Graphic credit: REUTERS/Catherine Trevethan


One of Japan’s major problems is its rapidly ageing population, already one in six people is over 65 and it is estimated that by 2050, one in three people will be past retirement age. The shrinking young workforce will be unable to support the elderly, this is why many save for retirement instead of spending their cash to keep the economy going.


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