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Japan’s GDP contracts 3.3% in fourth quarter, 12.7% annualized

February 16, 2009
By Ken Worsley


While PR fallout has yet to land concerning Finance Minister Shoichi Nakagawa’s seemingly drunken appearance at the G7 meetings in Rome this past weekend1, data released today by the Cabinet Office shows Japan’s GDP as having fallen 3.3% in the October quarter, annualized at a 12.7% decline. This is the largest fall since since an annualized 13.1% decline in the January-March quarter of 1974.

For comparison, while Japan’s October-December GDP declined 3.3% against the third quarter, the US saw a 1% fall while the EU experienced a 1.5% contraction.

Where were the declines seen? Here’s a breakdown of performance by major categories, compared against the third quarter:

Domestic Demand: -0.3%

Private Demand: -0.6%

  • Private Consumption: -0.4%
  • Household Consumption: -0.4%
  • Household Consumption (excluding rent): -0.6%
  • Private residential investment: +5.7%
  • Private non-residential investment: -5.3%

Pubic Demand: +0.6%

  • Government consumption: +1.2%
  • Public investment: -0.6%

Capital Spending: -2.9%

Exports of goods and services: -13.9%
Imports of goods and services: +2.9%

The largest drag on GDP figures is clearly in the export category, which fell at an annualized 45.0% in the fourth quarter. Is there any end in sight for this? With bankruptcy figures still climbing and machinery orders still falling, the head of research at the Bank of Japan, told reporters last week that there is a possibility that the first quarter of 2009 might see worse numbers than what was reported today.

The BBC quotes State Minister in charge of Economic and Fiscal Policy Kaoru Yosano as saying, “Japan alone won’t be able to recover. The economy has no border. It is our responsibility to rebuild the domestic economy for other countries.”

Such a statement seems to shrug off the possibility that an uptick in domestic consumer spending is either possible or will do much to bolster the economy. Although it’s not stated directly, Yosano’s words seem to run against the spirit of the stimulus package championed by Prime Minister Taro Aso. He is correct in believing that Japan cannot recover until exports begin selling again. However, the final sentence - “It is our responsibility to rebuild the domestic economy for other countries” - seems quite odd. Exports certainly have not fallen off due to problems with Japan being able to provide supply and inventory, and Japan would have little trouble providing ample supply should demand pick up, say, next week or so.

At least Yosano wasn’t visibly drunk when speaking.

1For more on Nakagawagate, see what Tobias Harris has written over at Observing Japan, as well as what MTC has written at Shisaku.

Filed Under Cabinet Office, Economic Reports, GDP 

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Comments

7 Responses to “Japan’s GDP contracts 3.3% in fourth quarter, 12.7% annualized”

  1. David on February 17th, 2009 10:17 am

    I am still waiting for a reporter to ask Aso if Japan will still be the first to recover from the downturn.

  2. Ken Worsley on February 27th, 2009 12:57 am

    David, Aso won’t be in any position to talk to reporters when Japan recovers from the downturn.

    That said, I doubt Japan will be very far behind. It depends on what measure one chooses to use to define “recovery.”

  3. Bruce on March 11th, 2009 4:43 pm

    I’ve been prowling your blog looking for comments on what you think of the economic stimulus package. It is particularly pertinent as I received my paperwork for it yesterday. It’s happening now.

    Aso apparently wants everyone to take their shekels and go forth and buy! But what will people buy? Hmmm. We all have to get new digital TVs so that may be it. Myself, I don’t have many choices. I have to pay my taxes! I’ll be sending mine right back to where it came from!

    But let’s take an average family of six, mom, dad, two children and grandpa and grandma. They’ll get ¥104,000 which is about enough for a nice widescreen TV if you don’t get a really good one! If they are about to lose their home or car it won’t make much of a difference. It might cover new uniforms and supplies for the kids if they are in school, but then again it might not. All of this assumes that the family can agree to spend it on one item.

    If they are like most families I know this puny handout will lead to more domestic squabbling. I predict that a large percentage of the cash handouts will go into stress-relieving activities like pachinko, drinking and also the lottery. If you have a way to track the sale of lottery tickets over the next few weeks I’ll bet there is a moderate jump! Bottom line this stimulus cash won’t help Toyota a jot!

  4. Ken Worsley on March 12th, 2009 7:42 pm

    Bruce, I guess I haven’t commented on it here, maybe because I considered it more political than economic. I got my paperwork today.

    I agree with your last paragraph. My view is pretty much the same. I can take this money and either buy a couple week’s worth of groceries for myself, or have a couple of piss-ups, or go to a few baseball games. Most likely it will go into the baseball fund.

    I’ve never actually seen stats on lottery sale tickets, though I’ve never looked. I’m not sure if there’s a way to track them over weeks or even months, or if they just announce annual figures. Either way, it would be interesting to see if there’s any effect.

  5. Bruce on March 15th, 2009 11:21 am

    I talked to a friend of mine who works at a city hall about the economic stimulus payments. Each city, town and village has to go out and find a printer to print the forms used in the distribution process. There is no government printer and they can’t use a large national printing company. My friend’s city got their forms back from the printer last week but there were a lot of errors and they had to print them all again!

    Now I wonder if the printing company has to eat the cost of the mistake and perhaps wind up losing money on the deal!?! It might be that the paper and ink suppliers were the only ones who made money! In the end it may be that no one wins and all the money is just frittered away! Ouch!

  6. Ken Worsley on March 18th, 2009 4:54 pm

    Bruce, it’s not terribly surprising. The central government has done little, if anything, to provide guidance for how this will all work. A lot of city offices see this as nothing but a nuisance.

    Now I wonder if the printing company has to eat the cost of the mistake and perhaps wind up losing money on the deal!?

    If that was the case, they probably wouldn’t bother reprinting them. This is the government, not a real client. They can always squeeze extra money out of them and customer satisfaction means nothing.

  7. J on March 22nd, 2009 3:12 pm

    where the hell is my paperwork, got a family of four (six if u count my love handles)…I just bought some jewelry in the U.S so this will pay for a bit of it-already spent, faack it since my portfolio is down about 55%

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