Japan has officially entered the recession after the Japanese Cabinet’s office confirmed today that the country’s economy has contracted for its second successive quarters.
Japan’s gross domestic product, GDP, has fallen by a further 0.4 percent, slipping the country into the inevitable predicament, as many analysts have predicted before. In a way, the recession announcement is not that all surprising.
The last recession hit the country in 2001. The current recession is expected to last for four miserable quarters.
Japan is the world’s second largest economy after the United States, with the country highly dependent on export industry and business investment. As the export business worldwide is suffering from the financial downfall, major companies are hit hard and instead of recording profits, they are seeing red instead. A number of small and medium companies have begun their going-out-of-business sale. Street business owners are seen on the road with microphones announcing their garage sale.
Worse is yet to be expected as major corporations are expected to announce layoffs and business closure soon.
Japan has been enjoying its longest run of economic expansion until the global credit crunch and subprime mortgage crisis in the US halted its impressive surge and started to sink its export industry.
Other countries worldwide which have entered the recession in the recent run include Singapore, Ireland, Italy and Germany.
Major economic powerhouses such as United States, Canada and Europe are heading towards recession. Japan too, is not spared.
A recent report by Merrill Lynch indicated that the country is likely to embrace recession in the next 12 months. The cabinet in the Prime Ministers office is expected to officially declare an economic recession in due time.
The falling numbers of exports, drop in public and private investment, and lower consumer spending combine to shake the economic pillar of the country, with its GDP (growth domestic product) shrinking by some 0.6 percent. The rate of the downturn is the fastest and ugliest since the last recession in 2001.
Japanese based automaker, Toyota, which is currently the world’s biggest car maker has seen its profits slumping close to 30% as the continued increase of petrol price put off consumer’s interest to buy vehicles. Its sales in America is the worst hit and its performance of going 7 years with full profits is in grave danger.
“The increase in oil and commodity prices is damaging corporate profits, while rising inflation is hurting households,” Mamoru Yamazaki, chief economist for Japan at RBS Securities told The Times, UK based newspaper.
Japan was struggling during the recession periods declared separately in 1998 and 2001.