As Japan's Economy Falters, New Premier Vows Swift Action
Wednesday, October 1, 2008
TOKYO, Oct. 1 -- As Wall Street gyrated this week between panic and hope, dismal new data in Japan showed that the world's second-largest economy, already contracting, has almost certainly fallen into recession.
Japan's benchmark Nikkei stock average fell to its lowest level in more than three years Tuesday, although it rebounded slightly in early trading Wednesday. Markets in China, Singapore and Hong Kong were closed Wednesday for holidays.
In Tokyo, delay in the approval of a U.S. financial rescue package dovetailed with the release of worse-than-predicted government figures showing that factory output and consumer spending fell sharply in August, as unemployment rose to a two-year high of 4.2 percent.
For the first time in five years, Japan's biggest makers of cars and electronics have become pessimistic about their business prospects, according to a Bank of Japan survey released Wednesday.
Japan's economy started shrinking in the second quarter of this year, ending its longest period of sustained growth since World War II. A decline in the third quarter now seems certain, several economists said.
Car shipments to the United States nosedived in August, down 30 percent as Toyota, Honda and Nissan all cut production.
Exports, the main engine of growth in Japan's postwar rise, have stalled this year. That fizzle, together with high fuel and food prices, gave Japan a rare trade deficit in August.
How the Japanese government will -- or can -- respond to the contracting economy remains an open question. The government faces continued parliamentary deadlock.
Prime Minister Taro Aso, who assumed power last week, used his first speech to parliament Monday to dress down the opposition Democratic Party of Japan for gumming up the government with political gamesmanship. Aso's Liberal Democratic Party controls the lower house, while the opposition controls the upper house.
"The opposition thinks primarily of the political situation," Aso said. "The lives of the people are a second or third priority."
In a substantial break with his three predecessors, Aso has announced plans to revive the economy by cutting taxes and increasing government spending.
Critics fear this will revive pork-barrel spending on unneeded dams, bridges and roads -- a hallmark of the ruling party's governing style in the 1990s and before.