For the fourth quarter of 2008, Japan’s Economy Plunges at Fastest Pace Since 1974.
Japan’s economy contracted in the fourth quarter at the fastest pace in 35 years as a collapse in global demand continues to drain the life from the world’s second-largest economy.
Japan’s gross domestic product, or the total value of the nation’s goods and services, dropped at an annual pace of 12.7 percent in the October-December period, the government said Monday. That’s the steepest drop for Japan since the oil shock of 1974. It far outpaces declines of 3.8 percent in the U.S. and 1.2 percent in the euro zone.
The three main pillars underlying Japan’s emergence from the so-called ”lost decade” of the 1990s have crumbled, said Martin Schulz, an economist at Fujitsu Research Institute in Tokyo.
Lawmakers are debating a record 88.5 trillion yen ($963 billion) budget for the fiscal year starting in April. The Yomiuri Shimbun said once parliament passes the budget, Prime Minister Taro Aso — who faces dismal approval ratings — will announce the extra economic measures.
Japan passed a supplementary budget in January that includes a cash payout to taxpayers totaling 2 trillion yen ($21.8 billion). Aso has championed the idea, saying it will stimulate sagging consumer spending.
Toyota To Cut Domestic Output 54%
Bloomberg is reporting Toyota Will Cut Japan Output 54% in Current Quarter.
Toyota Motor Corp., the world’s biggest carmaker, will slash domestic production 54 percent in the current quarter as demand plunges in the U.S. and Japan.
The company’s output, excluding its Daihatsu Motor Co. and Hino Motors Ltd. units, will drop to about 519,000 vehicles in the three months ending in March, compared with 1.13 million units a year ago, according to figures derived from Toyota’s latest full-year forecast. Toyota spokesman Paul Nolasco declined to confirm the figures.
The worst U.S. car market in 28 years is forcing Toyota to widen production cuts after it slashed domestic output 23 percent in the third quarter. The plunge in car production at Japan’s largest company is contributing to the country’s sharpest economic contraction since the 1974 oil shock.
“This kind of drop is unprecedented, probably since the end of World War II,” said Edwin Merner, president of Atlantis Investment Research Corp. in Tokyo, which manages about $3.1 billion. “This is terrible.”
Industrywide vehicle sales in Japan fell the most in 35 years last month. Toyota’s fourth-quarter overseas production will drop 45 percent to 623,000 units, based on the company’s full year forecast.
Honda Motor Co., Japan’s second-largest carmaker, is also trimming domestic production to 1.15 million units this fiscal year, compared with an original plan for 1.31 million. The company is eliminating all of its 3,100 temporary workers in Japan, Honda said on Jan. 17.
Nissan Motor Co., the country’s third-largest automaker, is slashing 20,000 jobs worldwide next fiscal year, of which 60 percent will come in Japan. The carmaker’s domestic output will total about 1.1 million vehicles for the year ending March 31, down 289,000 units, or 21 percent, from its original plan in May.
Obama drops “car czar” idea
With auto sales collapsing everywhere Obama drops “car czar” idea
President Barack Obama has decided to form a government task force to oversee the restructuring of the struggling U.S. auto industry instead of naming a “car czar” with sweeping powers, a senior administration official said on Sunday.
Obama is appointing Treasury Secretary Timothy Geithner as his “designee” for overseeing auto bailout loans and as co-head of the new high-level panel along with White House economic adviser Lawrence Summers, the official said.
The last thing this country needs is for Geithner to have still more power. Yves at Naked Capitalism came to the same conclusion in Geithner and Summers Consolidating Power.
Indeed, Obama’s judgment on domestic issues is looking increasingly poor.
In Japan’s Stagnant Decade, Cautionary Tales for America
Please consider In Japan’s Stagnant Decade, Cautionary Tales for America.
The Obama administration is committing huge sums of money to rescuing banks, but the veterans of Japan’s banking crisis have three words for the Americans: more money, faster.
“I thought America had studied Japan’s failures,” said Hirofumi Gomi, a top official at Japan’s Financial Services Agency during the crisis. “Why is it making the same mistakes?”
“I think they know how big it is, but they don’t want to say how big it is. It’s so big they can’t acknowledge it,” said John H. Makin, an economist at the American Enterprise Institute, referring to administration officials. “The lesson from Japan in the 1990s was that they should have stepped up and nationalized the banks.”
Instead, the Japanese first tried many of the same remedies that the Bush administration tried and the Obama administration is trying — ultra-low interest rates, fiscal stimulus and ineffective cash infusions, among other things. The Japanese even tried to tap private capital to buy some of the bad assets from banks, as Mr. Geithner proposed.
So far, the Obama administration’s plan avoids the hardest decisions, like nationalizing banks, wiping out shareholders or allowing banks to collapse under the weight of their own bad debts. In the end, Japan had to do all those things.
The article goes on to suggest that nationalization saved Japan’s banks. That’s not likely. Correlation is not causation. Japan started to “recover” when the global credit boom took off. Now that the credit bubble has burst, Japan is back where it started. No one has learned a thing from Japan.
Mike “Mish” Shedlock
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