Japan Exports: The First Economy To Fall Hard

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While GDP measurements vary a bit from country to country, Japan is probably the world’s second largest economy. Based on the decade plus economic stagnation in the nation in the 1980s and 1990s, it appears that Japan may be more susceptible to deep and long downturns.

Or, it may be that, with its reliance on exports and imported oil, that Japan is a good early warning system for what is likely to be next for other major developed economies.

According to Bloomberg, "Japan’s exports plunged the most on record in November as global demand for cars and electronics collapsed, signaling more factory shutdowns and job cuts are likely as the recession deepens." The fall-off was 27%.

There is no reason to believe that China and the US are not heading in the same direction with exports hitting low points early next year and probably continuing for months. US exports may be helped some by the overseas need for agricultural products and weapons, but consumer goods and technology product demand are likely to be undermined as both individuals and businesses cut spending in the EU, China, and Japan. Even the wealthy Arab countries are felling the pinch.

The situation for China is likely to be worse. No other country with significant GDP growth, even India, has relied so much on shipping goods to the developed world. If China experiences a double-digit plunge in exports, its economy could return to a period of  prolonged contraction, perhaps the longest since the country moved  into a period of hyper-growth after government reforms in the late 1970s.

So far, the recession in China and the US does not look as bleak as the one in Japan. Exports for the two countries have moderated but not collapsed. But, almost every sign in the global economy points to a sharp downturn in spending in nearly every sector.

China and US export figures could start to look like Japan’s is a remarkably short period of time.

Douglas A. McIntyre