http://ctv2.theglobeandmail.com/servlet/story/RTGAM.20090216.wjapanmarkets0216/business/Business/businessBN/ctv-business
Summary
On February 16, the Japanese government announced Japan’s gross domestic product contracted by 3.3 per cent in the fourth quarter last year from the previous quarter. This stat shows Japan’s economy is shrinking at the fastest rate in nearly 35 years due to the declining global export demand. Japan’s economy, the second largest in the world, shows no signs of recovery as the government also projected that the current quarter will also post a contracting GDP value. The global economic problem has hit the Japanese export-dependent economy hard as Japan’s export fell a record 13.9 per cent in the last quarter. This triggered many companies like Sony Corp. and Toyota Motor Corp. to cut thousands of jobs. Families are also feeling the pinch and are spending less due to rising number of unemployment. In 2008 overall, the value of Japan’s GDP shrunk by 0.7 per cent, which is its first decline in nine years.
Economic Indicators
Being this is the third consecutive drop for the GDP value, Japan’s economy is officially in amidst of a recession as when a country posts at least two consecutive quarters posting negative growth, the economy is deemed to be in a recession. The declining levels of the GDP, measuring the market value of total goods and services produced in a given time period, is mainly due to the shrinking global demand of Japanese products, causing Japan’s production of goods to plunge. This means less workers are needed to produce those goods, therefore more people are unemployed and are looking for a job. When Japan is not producing as much the curve representing the production of goods and services falls inside its production-possibilities curve and the curve shifts to the left. As production is slowing down, the type of the unemployment that the Japanese faces is either called demand-deficit unemployment or occupational dimension of structural unemployment, which are situations where employers find it more difficult to sell their products, mainly luxury items, so they layoff their employees. High levels of unemployment usually means there will be less spending in the economy, causing a chain reaction in that due to less spending even more jobs will be lost.
Reflection
Since Japan has many companies that depend on global export, their economic crisis is unavoidable. The slumping economies in the world render less demand for Japanese products such as cars, electronics, and appliances. To deal with the economic slowdown in Japan, the government should hire the workers who have lost their jobs in the manufacturing industry to improve on infrastructure. To prevent rising unemployment levels, the government should hire the unemployed to work on highway constructions, buildings development, and bridge upgrades. This way, the unemployed would get a job and spend more in the economy. In turn, the public benefits because of the infrastructure improvements. With more spending in the economy, the security of people’s jobs will be better, as well. During this economic slowdown, Japan should also consider diversifying their industries and not just depend on the export manufacturing industry for economic growth. They might want to consider expanding the tourist industry for the local Japan citizens, aimed at promoting spending within their own country. Although the short term outlook of Japan’s economy may seem bleak, the government can create a healthy economic recovery by employing more people and diversify their industries.
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5 comments:
To have a strong economy like Japan struggling in the midst of this recession is certainly a testament to the circumstances economies all over the world is in.Much of Japan's industries are concentrated in the areas of technology e.g: Sony, Toyota. These items are mostly elastic, and therefore with uncertain economic conditions their demand would experience a significant drop prompting companies to cut jobs because they do not need as many workers if the demand for products is down. Indeed, the Japanese government should invest in creating more jobs to stimulate the economy.With more people working, the more consumer activity which will stimulate the economy.Lowering bank interest rates may get people to spend more with loans, but with the external drop in demand its probably going to be ineffective in restoring the economy. Overall, the key aspect Japan should focus on is creating more jobs to increase consumer spending.
J.Tam
Block F
I did not know that Japan's economy was the second largest in the world. If Japan is having a recession then it is clear that the economy is in a grave condition. Japan is a world leader when it comes to technology and cars. The demand for these products from Japan are usually fairly high but because of the current recession the demand for them has dropped significiantly. I agree with you when you say that the Japanese government should rehire those who have lost their jobs to improve their infrastructure. This has been done before and it had moderate sucuess in the past. (Franklin Roosevelt and the New Deal) When people have their jobs back, they will be more likely to spend more money which would eliminate the demand-deficient unemployment.
Gordon Lai
Since Japan is the main contributor to electronic goods and cars, it is no wonder their economy is down. Those items are not essentials like agricultural goods but instead are luxury items that consumers are not going to look into buying with money so tight and with unemployment looming over their heads. I agree with your idea of promoting spending within their own country instead of relying on exports to help their economy. But that is not any easier than trying to increase the export amount, as the Japan’s own economy is down and the Japanese people are just as careful with their spending as the rest of the world.
Yifan D
Blk E
I also did not realize that Japan’s economy was the second largest in the world. I find it quite remarkable that although Japan’s economy very large and strong, it “shows no signs of recovery”. I agree with your suggestion of the government to recover its economy by employing those that lost jobs into manufacturing and highway constructions, buildings, and bridges. I believe the easiest way to try to recover a lost economy is to quickly find jobs for those who have lost them because of the failing economy. This proves that the situation is a “global” disaster even for countries with a strong economic status.
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