Tough Times Ahead for Japanese Economy?

I hate the word recession. It does not help anyone anywhere. We have been talking a lot about economic slowdown in the US and it seems that USA may be heading for a recession. Well, it seems that the condition in Japan is even worse. In the April-June quarter, Japanese economy shrank instead of expanding. So, Japan has entered into an economic recession. The price of oil in the international market has decreased some and it should give Japanese people some respite for the time being.

The price of oil is an important factor but there are other important things too. There is hardly any respite about the price of basic commodities like food. As a result, many people in Japan are now a bit reluctant to spend money freely on consumer goods. It is like a evil cycle.

So, what next for Japanese economy? I feel that Japan is still a very rich country and Japanese government can surely afford to spend some money to motivate the consumers to go back to on their habits.

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Annual GDP falls 2.4% in April-June qtr

Japan's stock prices slump as US unemployment suges

As the US recession continues, Japan’s export oriented economy is facing serious trouble. The USA is the major market for many Japanese companies. Japan observed the sharpest decrease in its stock prices in the last two weeks as the unemployment rate in the US reached record high. Denso Corporation (TYO:6902),Sony Corporation (TYO:6758), observed major slump in their stock prices. Yoshihiro Ito, managing director, Okasan Asset Management Co. said that looking at the high rate of unemployment in the USA, investors have started to think that America is falling into a recession. Bloomberg reports:

The Nikkei 225 Stock Average sank 322.15, or 2.2 percent, to 14,167.29 as of 10:10 a.m., heading for the biggest drop since May 26. The broader Topix index declined 29.65, or 2.1 percent, to 1,398.46. Nine stocks fell for each that rose on the index.

Unemployment jumped by half a point to 5.5 percent last month in the U.S., according to a report released by the Labor Department on June 6, which was higher than every forecast in a Bloomberg News survey. It was the biggest increase in the jobless rate since February 1986.

Denso Corporation, one of the largest auto-parts making company in the world, lost 4.7% to 3900 yen. Toyota Motor Corporation saw a 2.9% decrease in share prices to 5,430 yen. Sony Corporation’s share prices dropped by 3.1% and Canon Inc. fell by 4.2%.

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