Japan plunges into depression
Peter Martin
February 17, 2009
AUSTRALIA'S biggest and most reliable customer, Japan, has plunged into depression, with federal Treasurer Wayne Swan now warning of the worst global downturn "in our lifetimes".
- Japan among worst hit
- Businesses forecast losses
- Australian export fears
Japan's economy shrank an annualised 12.7 per cent over the December quarter, its worst result since the 1974 oil shock.
Japan is by far Australia's biggest export customer, accounting for one in every five container ships that leave Australia's shores.
The new figures put it among the worst-hit casualties of the global crisis.
The annualised contraction of 12.7 per cent, or 3.3 per cent in quarterly terms, dwarfs those of the United States and Europe and is much worse than anything that happened to Japan during its so-called "lost decade" of recession in the 1990s.
The collapse in growth fits the profile of a depression — a deep recession in which annual GDP falls by 10 per cent or more.
Australia's other big customer, China, has had its growth rate almost halved from 13 to 6.8 per cent.
"These figures reveal just how serious the global recession is becoming," Mr Swan said. "They follow on the heels of the worst contraction in the euro area since records began in 1980.
"The last three months of 2008 are likely to have seen the sharpest synchronised downturn in the global economy in our lifetimes.
"It's is a sobering backdrop for Australia as we seek to do everything we can to cushion the impact the global downturn will have here," Mr Swan said.
A 14 per cent collapse in exports in the December quarter led Japan's plunge.
Toyota, Sony and Hitachi are forecasting losses and have begun firing thousands of workers, heightening the risk that a slump in domestic spending will deepen the downturn.
"At one time, it looked like Japan had escaped the brunt of the financial crisis," said Hideo Kumano, chief economist for the Dai-Ichi Life Research Institute. "This shows how feeble Japan's economic fundamentals were in the first place."
Access Economics director Chris Richardson said Japan's plight showed there was "no place for Australia to hide".
"It is true that Japan's statistics are more dodgy and more volatile than those of other large nations, but this fits what know about the reach of the crisis," Mr Richardson said. "It is very big and very nasty.
"It is impossible for Australia to avoid a recession; perhaps not absolutely impossible, but it is incredibly hard for Australia to hold against the tide, and the tide pulling us down is getting stronger every day.
"This is confirmation of what's facing us," said ANZ chief economist Saul Eslake. "Japan is a more important and more diversified export market than China.
"Australian GDP per person is already running backwards. What happens over the next few months will determine how bad things get."
The impact of the downturn in Asia was felt in Albury yesterday when 400 workers at cars parts company Drivetrain Systems International were stood down without pay.
The business was hit hard by last month's collapse of South Korean vehicle manufacturer SsangYong, a major customer.
Finance figures released on Monday suggest that Australians resumed borrowing in December in the wake of a further interest rate cut and the Government's $8.7 billion fiscal stimulus hand-outs.
New lending commitments climbed 3.5 per cent. All forms of personal lending increased, including a solid 24 per cent lift in loans to buy new cars. But the bulk of the new loans were for refinancing or for debt consolidation. Lending remains 27 per cent down over the year.