Japan Joins U.S. in Recession Worries
New Japan Domestic Economic Data Raises Concerns

<August 13, 2008><Reuters>In separate reports on the Reuters network, new economic data from Japan suggests that the economy may be in, or near, a recession. According to the latest government data, the Japan economy contracted by 0.6 percent in the second quarter of the year, the first decline in the Japan economy since the July-September 2001 quarter when the Internet bubble burst hitting stocks and causing an economic slump.

Japan suffers from many of the same issues affecting consumers in the U.S. with soaring energy prices, dramatic increases in the price of many food staples. However, their situation is complicated by the fact that workers have experienced flat pay increases over the last year or so due to Japan corporations struggling with global competition and sluggish export markets.

Japan is the world’s second largest economy and this quarterly GNP decline ends their longest period of economic growth since World War Two.

Consumption, or what is known in the U.S. as consumer spending, is about 55 percent of the Japanese economy, and stressed consumers appear to be holding back on their spending. “Though prices are soaring, our salaries don’t rise. Our nation as a whole is demoralized,” said worker Misako Shibasaki.

Economists are split on the impact of this news with some suggesting that a prolonged recession is under way, while others say the economy is more resilient as corporations cleaned up their balance sheets after the asset bubble collapse of the 1990s.

Hopes for a turnaround are complicated by the fact that exports to the U.S. and certain emerging markets in Asia has slowed, after a protracted period of growth. And spending by Japan corporations has fallen .2 percent for a second straight quarter of decline.