Wednesday, February 18, 2004
Japan escapes the spider web
Japan's economy is finally emerging from the economic doldrums. Japan has been in a recession for OVER 10 YEARS (and Americans thinks they have it bad). Japan's recession has lasted so long that they started to suffer from deflation (prices start to go down), which might sound like a good thing, but is actually WORSE in many ways than inflation (people have less incentive to buy, leading to a vicious circle of ever-deepening recession).
There are a number of reasons for Japan's long recession, both cultural and government policy related, but what I think is interesting (and which isn't mentioned in the CNN article) is one of the reasons they are emerging from their slump: booming demand from China.
Japan has been doing a number of things to reduce costs and corporate debts, all of which are important, but they've been trying those kinds of things for years. What's different is that they now have a 1.3 billion market on their doorstep that is rapidly growing and seems to have a nearly bottomless demand for new - and imported - products (that makes it sound like Japan suddenly moved itself next-door to China. What I mean is that China is now a MUCH more important market for goods, particularly now that it is in the WTO). GM's (the car company) recent revival was built on strong profit growth in China. China is now its fastest growing market, bar none.
Either way, Japan's revival is good for the global economy. Japan has a 4.1 trillion economy, or just under half the size of the American one. That's a lot of consumers to add to global demand for products. That, combined with booming China, can only mean Good Things ™.
Japan's economy is finally emerging from the economic doldrums. Japan has been in a recession for OVER 10 YEARS (and Americans thinks they have it bad). Japan's recession has lasted so long that they started to suffer from deflation (prices start to go down), which might sound like a good thing, but is actually WORSE in many ways than inflation (people have less incentive to buy, leading to a vicious circle of ever-deepening recession).
There are a number of reasons for Japan's long recession, both cultural and government policy related, but what I think is interesting (and which isn't mentioned in the CNN article) is one of the reasons they are emerging from their slump: booming demand from China.
Japan has been doing a number of things to reduce costs and corporate debts, all of which are important, but they've been trying those kinds of things for years. What's different is that they now have a 1.3 billion market on their doorstep that is rapidly growing and seems to have a nearly bottomless demand for new - and imported - products (that makes it sound like Japan suddenly moved itself next-door to China. What I mean is that China is now a MUCH more important market for goods, particularly now that it is in the WTO). GM's (the car company) recent revival was built on strong profit growth in China. China is now its fastest growing market, bar none.
Either way, Japan's revival is good for the global economy. Japan has a 4.1 trillion economy, or just under half the size of the American one. That's a lot of consumers to add to global demand for products. That, combined with booming China, can only mean Good Things ™.
