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Source: www.asiaecon.org |

JAPAN'S EXPORTS DROP AND LACK OF DOMESTIC CONSUMPTION IMPACTS THE WORLD'S SECOND LARGEST ECONOMY


  A recent report states that Japanese exports have dropped 45.7% in January, compared to a year ago. This news come as no surprise as Japan's larger automakers have reported slumps in sales, down 69%. Trade in electronics and other goods have also suffered tremendously . Although, Japanese are considered to be fiscally conservative, overall the Japanese economy is driven by trade and with the lack of trade globally Japan has been one of the worst hit economies.


A recent report states that Japanese exports have dropped 45.7% in January, compared to a year ago. This news come as no surprise as Japan’s larger automakers have reported slumps in sales, down 69%. Trade in electronics and other goods have also suffered tremendously . Although, Japanese are considered to be fiscally conservative, overall the Japanese economy is driven by trade and with the lack of trade globally Japan has been one of the worst hit economies.

Despite government efforts to spur consumer spending, Japanese are wary of consumerism. With one of the oldest populations, the majority of Japanese are still cognizant of the depression that hit it in the 90’s. Even with recent booms in the economy, Japan is still frugal. For instance, financially stable households used old bath water to do laundry to save on utility bills during the recent economic boom. But even during the periods of 2001 and 2007, per-capita consumer spending only rose 0.2 percent. With the economy shrinking at a rapid rate, Japan looks to be in a recession because the economy cannot depend on domestic consumer spending alone and also due to the decline in exports.

One source highlighted on a middle classfamily, the Takigasaki family lives in the Tokyo suburb of Nakana. The breadwinner of the family is currently at a well-paying job, but the wife still rations vegetables in fear of uncertainty of job stability.  She penny-pinches in case her husband does find himself unemployed. The cutting back is not only found in elder generations, but amongst 20 year olds too who are also cutting back once popular luxury items such as Louis Vuitton bags. Typically, many baby boomers wouldhave started to spend money saved from their pension funds but there is a case of distrust of Japan’s pension system. The pension system is rapidly failing due to the inability of the system to handle the rapidly aging society.

The lack of consumer spending is not the only factor that is impacting Japan’s economy, but the decreased demands for vehicles has contributed to the 45.7% drop in January. Since 1980exports have exceeded imports, but in recept reports imports exceeded exports by 952.6 billion yen. Demand for Japanese cars have dropped by 69%, with exports to United States falling 53%, exports to the European Union falling 47% and exports to Asia falling 47%. The break down for Japanese car makers exports compared to a year earlier are as follows: Toyota down 57.1%, Honda down 46.3%, Nissan down 62.1%, Mitsubishi down 77.4%, Mazda down 72.1% and Suzuki down 56.1%.

Despite Japan’s car makers contributing vastly to the precipitous decline, Japanese electronic companies have also reported weakening outputs. Sony reported in January that it expected to post an operating loss of nearly 260 billion yen compared to a profit of 475.3 billion yen posted a year earlier. Sony stated that despite electronic competition from Apple’s iPhone and Nintendo’s Wii game console, consumer demands for Sony products has decreased. In order to combat the loss, Sony announced an overhaul of operations including massive layoffs and factory closings. The company has also introduced an early retirement program, which strongly insists that employees seek other employment opportunities.

Many analysts blame the rapidly falling exports due to the strength of the yen. The dollar had depreciated nearly 20 percent again the yen since mid-August, while the Euro had depreciated almost 30 percent in the same period. As most global economies are working to stave off inflation, Japan is finding itself trying to stave off deflation. The government in response is looking to pass bills through parliament to include cash hands out of at least $130 for each Japanese taxpayer. However, analysts are not optimistic of government efforts due to the unpopularity of Japanese Prime Minister Taro Aso.

The huge drop of Japanese exports is an indicator of the severity of the global economic and financial crisis. The crisis has influenced global consumerism, with the lack of liquidity, exporting countries like Japan are struggling. In the case of Japan, second largest economy, the global financial crisis is expounded due to lack of domestic consumerism.

Source: www.AsiaEcon.org

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Source: www.asiaecon.org |


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