Slowdown in exports, GDP and the US economy about to hurt Japan?

May 7, 2007
By Ken Worsley

The week opens with talk of slowdown (ahem…not recession!) in Japan. Bloomberg has weighed in with a report starting, “Japan’s economic growth probably cooled in the first quarter from the fastest expansion in three years as companies and consumers spent less.”

Bloomberg’s survey of economists predicts 2.7% growth at an annual pace for the Japanese economy in the first quarter of 2007, following 5.5% in the fourth quarter of 2006. Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo, was quoted as saying:

Growth will moderate. Export demand is already showing signs of slowing and consumer spending won’t be able to accelerate with wages stagnant.

Just a few days ago, the International Herald Tribune published a piece entitled Stockpiling of exports signals lull in Japan that pointed out: “No one has quite begun talking of recession just yet. The economic data are too mixed for that.”

We’ve been speaking of stagnant wages for months now. It seemed natural that companies would go through a period of heavy capital spending, but now it appears as though the economy is caught in a loop of negative feedback: people just can’t spend more if they don’t make more. And companies won’t be able to spend more if they don’t sell more, which we already know they aren’t doing domestically. How much of an export crunch will it take before real pain sets in?

Filed Under Economics, Export & Import, Japan