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2.7%  Q1 GDP    4.57%  avg. 30-year mortgage     9.5%  Unemployment

Japan Inc. in Trouble

A raft of bad news has been coming out of Japan lately, with bad jobs and manufacturing data released today, so let's take a look at what's going on.

This morning, Japan's government said that national unemployment jumped from 3.9 to 4.4 percent in November. That seems low for us -- unemployment is 7.2 percent in the United States -- but for nearly-full-employment Japan, that's a shock.

Also released today: Factory production in November plunged 9.6 percent, the biggest drop since the government began keeping the statistic in 1953.

Japanese semiconductor giant NEC said today it is cutting 20,000 jobs worldwide -- half of them in Japan -- so you can expect that unemployment number to keep rising.

Other Japanese giants -- Sony and Toshiba -- are cutting jobs as earnings drop. And Honda today said its third-quarter earnings were down 90 percent, although, amazingly, that's not as bad a dive as analysts were expecting. Japan's No. 2 automaker cut its 2009 forecast by more than half.

What's going wrong?

First, Japan makes a lot of things that are meant to be bought -- TVs, audio equipment, chips and so on -- that nations in recession simply are not buying. Japan is the world's second-largest exporter after the United States.

Second, Japan's yen has been strong for some time, which raises prices for its products overseas and reduces demand. Auto analysts' rule-of-thumb on the yen goes like this: Every one-yen appreciation against the dollar reduces Toyota's earnings by $450 million.

Japan is fearful of slipping into another "lost decade," the name given to the period from 1991 to 2001 marked by stagnant growth, caused by a number of poor policy decisions following the collapse of Japan's go-go '80s economy.

-- Frank Ahrens
The Ticker is Twittering!

By Frank Ahrens  |  January 30, 2009; 10:53 AM ET
Categories:  The Ticker  | Tags: Honda, Japan, NEC, Sony, Toyota  
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Next: Obama/Biden Throw Red Meat At Unions

Comments

What's going wrong?
First, Japan makes a lot of things that are meant to be bought..
Second, Japan's yen has been strong for some time...
Japan is fearful of slipping into another "lost decade," ....

LASTLY, JAPAN DID NOT KNOW THAT BUSH/CHENEY IS GOING TO BE THE PRESIDENT OF THE UNITED STATES AND THEY WERE NOT AWARE OF THE CLOWNS IN WALL STREET.

Posted by: Gamer | January 30, 2009 12:07 PM | Report abuse

There is a general tendency to overvalue financial policy decisions. A big part of Japan's lost decade was caused by increased competition from lower wage countries like Korea and China. Unsustainable US comsumption has kept the global economy busy. Now that consumption is contracting and the whole global economy is in trouble. No policy decision can change that reality. It has to be dealt with through competition and destruction of excess capacity until we get back to a balance between consumers and producers. Government financial policy may help avoid too much overshoot on the down side due to a spiral of negative momentum. But there is no way that playing with interest rates is going to fix the real global problem with too much capacity for the wrong products.

Posted by: dnjake | January 30, 2009 12:33 PM | Report abuse

Typical! America is the biggest and best in everything. Sorry, but the world's export champion is Germany! America is the import and trade decicit champion, and as a result this country has become the top pauper among industrialized nations.

Posted by: petercschmid | January 30, 2009 1:38 PM | Report abuse

Typical! America is the biggest and best in everything. The world's export champion is Germany. America is the number one importer, has the biggest trade deficit and as a result has become the pauper among industrialized nations.

Posted by: petercschmid | January 30, 2009 1:46 PM | Report abuse

Gee, it must be the powerful Japanese unions that have put the country in trouble. That also must be the answer to the mounting economic problems in China. Well, who else is to blame? After all, the Republicans seem to be laying all our ills at the feet of the unions; if only they would take wage and benefit cuts we would be on the road to prosperity. Because the greedy pigs want $27 an hour, management has to give up a million or so each.

Posted by: csintala79 | January 30, 2009 1:59 PM | Report abuse

With agressive and low wage competition from other Asian countries, the only thing that kept Japan inc. in the game in the last few years was zero interest rates and the carry trade that allowed them to quasi manipulate their currency.

That crutch is now gone. I suspect they will try to rig their currency again, which will set off a volcanic reaction as they will not be able to get away with what they have done in the past.

Posted by: Pebble1776 | January 30, 2009 2:11 PM | Report abuse

"Japan Inc. in Trouble"
"Japan Inc. in Trouble"
"Japan Inc. in Trouble"

Oh, how comforting to American ears!

Posted by: socrateos | February 2, 2009 12:14 AM | Report abuse

Seriously, you guy are terrible. You don't even check Wikipedia to see who the world's largest exporters are. As someone who lived in Germany, I can tell you that everyone there knows that Germany is the world's number one exporter. Moreover, according to cia.gov, China is the number two exporter. Stick with the New York Times, children!

Posted by: bat88 | February 2, 2009 9:53 AM | Report abuse

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