Japanese government in crisis as recession deepens

By John Chan
23 February 2009

As Japan confronts its worst recession since World War II, the government is in disarray, with the ruling Liberal Democratic Party (LDP) heading toward defeat in general elections due by September. Official statistics released this month revealed that the economy shrank by 12.7 percent on an annualised basis in the last quarter of 2008—the sharpest contraction since 1974 and steeper than any other major industrialised economy. Most analysts expect worse to come.

Prime Minister Taro Aso's political decline has paralleled the collapsing economy. When he came to office last September, Aso's rating in the opinion polls was hovering around 50 percent. A recent poll by NTV showed that his popularity had slumped from about 20 percent in January to just 9.7 percent. Some LDP lawmakers have defected from the party; others are demanding that Aso resign.

Aso's administration is increasingly shaky. Last month, vice minister for internal affairs Tetsushi Sakamoto had to publicly apologise after sparking anger over comments that homeless workers were unwilling to work. Last Tuesday, finance minister Shoichi Nakagawa was forced to resign after he appeared drunk at a G7 press conference in Rome.

A senior LDP figure told the Financial Times on February 16: "Being in the LDP is like being on the deck of the Titanic but with one important difference. We know that the ship is going to sink. Now all we can do is to wait for it to happen and then see who can swim."

FULL STORY

Japan exports drop 45% to new low

Japan's exports plunged more than 45% in January compared to a year ago to hit the lowest figure ever recorded, official figures showed.

Japan also had a trade deficit of 952.6 bn yen ($9.9bn; £6.8bn), the lowest figure since records began in 1979.

The demand for Japanese cars in particular dropped by 69%.

Demand for electronics and other goods has also slumped as global economies and consumer spending contract, pushing Japan deeper into recession.

FULL STORY

my hope is that the product of this crisis will be a return of the US to the manufacturing exporting industry.

my hope is that the product of this crisis will be a return of the US to the manufacturing exporting industry.

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"The manufacturing sector accounted for 38 percent of all mass lay-
off events and 44 percent of initial claims filed in January 2009;
a year earlier, manufacturing made up 30 percent of events and 35
percent of initial claims. This January, the number of manufacturing
claimants was greatest in transportation equipment (57,173) and
machinery (14,120). (See table 3.) The administrative and waste ser-
vices industry accounted for 12 percent of mass layoff events and
associated initial claims during the month."
Bureau of Labor Statistics

I doubt that this will ever happen, considering the extent to which the manufacturing industries in the United States are getting ravaged by this crisis.

Shall we start the bets on how much longer GM will last?

Economic slump deepens in Japan as exports collapse

By Peter Symonds
26 February 2009

The collapse of Japanese exports last month underscores how rapidly economic recession is turning into a full-blown depression—and not just in Japan.

The Japanese trade figures for January, released yesterday, registered a 45.7 percent fall in exports year-on-year and a 31.7 percent drop in imports—the largest declines since 1957. The plunge in exports was the fourth monthly decline in a row and followed a fall of 35 percent in December.

Japan also recorded a trade deficit of 952.6 billion yen ($US9.9 billion)—the worst since records began in 1979. The trade statistics come on top of growth figures released last week, which showed that the Japanese economy shrank by 12.7 percent on an annualised basis in the December quarter.

The trade figures provoked alarm in the international financial press. In a comment entitled "Depression in the east points the way for the rest of the world," Guardian economics editor Larry Elliott said that while Japan had been in and out of recession over the past two decades, "make no mistake, this drop in exports does not mean recession: it means depression".

FULL STORY

Japan is falling. Fast.

new coup for you said:

my hope is that the product of this crisis will be a return of the US to the manufacturing exporting industry.

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Don't hold your breath. Manufacturers tend to stay away from high corporate tax rates and stringent labor laws. They also look unfavorably upon governments that collude with labor unions. We have all three in spades.

Jobs will continue to go overseas - where taxes are low and labor laws are lax - until we start lowering taxes and deregulating, however, the labor unions would never hear of such a thing, but who am I to stop them from shooting themselves in the foot?

Ethereal said:

Don't hold your breath. Manufacturers tend to stay away from high corporate tax rates and stringent labor laws. They also look unfavorably upon governments that collude with labor unions. We have all three in spades.

Jobs will continue to go overseas - where taxes are low and labor laws are lax - until we start lowering taxes and deregulating, however, the labor unions would never hear of such a thing, but who am I to stop them from shooting themselves in the foot?

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Our statuary corporate tax rate maybe high, but our effective corporate tax rate is fairly low compared to most other industrialized nations.

The fact is, its every bit as absurd for someone to blame outsourcing of manufacturing jobs on labor unions and taxes as it is for someone to blame outsourcing on free trade.

We started losing manufacturing jobs with the advent of containerization (container ships) in the early 70s. That made it possible to inexpensively and quickly ship huge amounts of goods around the world. Prior to containerization, goods were manufactured in the cheapest place to make them in America for American consumers. For example, the rust belt is where the rust belt is because of the concentration of rail and shipping in that area. Containerization allowed those goods to be manufactured in the cheapest and most efficient place to manufacture them in the world rather than just in the United States and capitalism's constant search for greater efficiency lead to just that - and there is nothing wrong with that. Goods and services should be provided by the companies and locations that can most efficiently provide them thus freeing up resources for what other companies and nations can more efficiently produce.

The only way to bring those manufacturing jobs back to the United States would be for us to lower our standard of living to be on par with the wages and working conditions of places like the Guangdong Province of China (whose moto happens to be "The World's Factory"). I would rather keep the 44k a year per capita GDP that we enjoy here with our services oriented economy than the 8k per capita GDP enjoyed by residents of the Guangdong Province, but hey, thats just me.

SouthernDemocrat said:

Our statuary corporate tax rate maybe high, but our effective corporate tax rate is fairly low compared to most other industrialized nations.

The fact is, its every bit as absurd for someone to blame outsourcing of manufacturing jobs on labor unions and taxes as it is for someone to blame outsourcing on free trade.

We started losing manufacturing jobs with the advent of containerization (container ships) in the early 70s. That made it possible to inexpensively and quickly ship huge amounts of goods around the world. Prior to containerization, goods were manufactured in the cheapest place to make them in America for American consumers. For example, the rust belt is where the rust belt is because of the concentration of rail and shipping in that area. Containerization allowed those goods to be manufactured in the cheapest and most efficient place to manufacture them in the world rather than just in the United States and capitalism's constant search for greater efficiency lead to just that - and there is nothing wrong with that. Goods and services should be provided by the companies and locations that can most efficiently provide them thus freeing up resources for what other companies and nations can more efficiently produce.

The only way to bring those manufacturing jobs back to the United States would be for us to lower our standard of living to be on par with the wages and working conditions of places like the Guangdong Province of China (whose moto happens to be "The World's Factory"). I would rather keep the 44k a year per capita GDP that we enjoy here with our services oriented economy than the 8k per capita GDP enjoyed by residents of the Guangdong Province, but hey, thats just me.

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You really think it's the simple, huh? We can just maintain our standard of living in the face of global ascendency? A simple world problem should communicate my point:

Per capita GDP is inversely proportional to jobs lost overseas. The number of jobs lost overseas is directly proportional to level of regulation.

Get the picture?

Ethereal said:

You really think it's the simple, huh? We can just maintain our standard of living in the face of global ascendency? A simple world problem should communicate my point:

Per capita GDP is inversely proportional to jobs lost overseas. The number of jobs lost overseas is directly proportional to level of regulation.

Get the picture?

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No I don't at all. Nor would any mainstream economist. Our economy has transitioned from a manufacturing economy to a service economy. The only way to transition back to a manufacturing economy would be reduce our standard of living and quality of life to the level of places like the Guangdong Province of southeast China. Then we could manufacture those goods here just as cheaply as they do there.

Having traveled to China, and that province, I feel comfortable in stating that the vast majority of Americans would not want that quality of life. Granted, they don't have those burdensome environmental regulations. Of course, the trade off is that you can't see past a block most days either.

We do what we do best, nations like China do what they do best. They manufacture all the cheap crap you see in big box stores, we build the best software on earth. In the end, I would rather live in a country that was better at highly skilled professions than in a country that was better at assembly line labor.

SouthernDemocrat said:

No I don't at all. Nor would any mainstream economist. Our economy has transitioned from a manufacturing economy to a service economy. The only way to transition back to a manufacturing economy would be reduce our standard of living and quality of life to the level of places like the Guangdong Province of southeast China. Then we could manufacture those goods here just as cheaply as they do there.

Having traveled to China, and that province, I feel comfortable in stating that the vast majority of Americans would not want that quality of life. Granted, they don't have those burdensome environmental regulations. Of course, the trade off is that you can't see past a block most days either.

We do what we do best, nations like China do what they do best. They manufacture all the cheap crap you see in big box stores, we build the best software on earth. In the end, I would rather live in a country that was better at highly skilled professions than in a country that was better at assembly line labor.

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You're neglecting the fact that we won't have a corner of the services market forever. Places all over the world, particularly India, are more than capable of meeting the demand of many service-based industries, if not now, then definitely in the future. America is stuck between a rock and a hard place as it concerns globalization.

We need to regain global competitiveness sooner than later. Yes, this will necessitate a slight decline in our standard of living but it's better than waiting until India and China and Brazil have caught up to us. It's easier to keep businesses in America than enticing them back after they've left. The longer we wait, the more precipitous the decline will be.

I think Americans need to stop obsessing over useless crap like big TVs and Grillmasters. There are more important things in life than material wealth, and unless Americans can wake up to this fact we will find ourselves in competition with economic leviathans whose populaces are perfectly capable of forgoing superfluous luxuries.

Either downsize that plasma screen now, or make a choice between medicine and groceries later. Your choice America.

Ethereal said:

You're neglecting the fact that we won't have a corner of the services market forever. Places all over the world, particularly India, are more than capable of meeting the demand of many service-based industries, if not now, then definitely in the future. America is stuck between a rock and a hard place as it concerns globalization.

We need to regain global competitiveness sooner than later. Yes, this will necessitate a slight decline in our standard of living but it's better than waiting until India and China and Brazil have caught up to us. It's easier to keep businesses in America than enticing them back after they've left. The longer we wait, the more precipitous the decline will be.

I think Americans need to stop obsessing over useless crap like big TVs and Grillmasters. There are more important things in life than material wealth, and unless Americans can wake up to this fact we will find ourselves in competition with economic leviathans whose populaces are perfectly capable of forgoing superfluous luxuries.

Either downsize that plasma screen now, or make a choice between medicine and groceries later. Your choice America.

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It is certainly not inevitable that nations like India and China win on providing skilled services. They will on some, they won't on others. In the example I gave in the previous post, software, Japan has a highly educated workforce and a developed economy, so does Western Europe, yet we still flat out own the software industry. This is despite 30 years of direct competition with them. Why? Because we produce the best software in the world. In the wake of the Dot Com crash many software companies tried to outsource development to nations like India, despite all the computer science graduates India is turning out, the outsourcing effort completely failed because they simply could not compete with American Software Engineers. In fact, there are more IT jobs in America today than there was prior to the Dot Com crash.

There are winners and losers in free trade just like there are winners and losers in capitalism. Just because nations like China have been winners on manufacturing, does not mean that they will be the winners in everything else. Moreover, we benefit greatly from free trade. A couple of months ago I found a 1975 Montgomery Wards catalog at my Mom's shop. Back then, virtually all TVs were made in America. The cheapest 19 inch television in that 1975 catalog was $475 dollars. That would be like paying three grand or more for a small TV today. Since that time, our standard of living has improved and we get the benefit of buying goods much cheaper. The people that were making TVs in American back then are working in other American industries today (and enjoying higher median incomes). Its not a bad trade off.

The fact that we are buying too many things like big plasma TVs is a problem with our over consumption and personal savings rate, not free trade or regulation.

Ethereal said:

You're neglecting the fact that we won't have a corner of the services market forever.

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As you have clearly neglected the fact that we'd never have the corner on manufacturing market forever.

America is stuck between a rock and a hard place as it concerns globalization.

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Actually this has been occurring for centuries. Every country as it industrializes and develops loses advantage in some areas and gains in others. We took away textiles from Europe. They gained in financial services.
China is more competitive in manufacturing but weak in financials compared to us. Welcome to Economics. This isn't something new. Globalization just expands something that natural occurs in non-isolated markets.

We need to regain global competitiveness sooner than later.

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We can do this without going back to manufacturing of the old sort. Nanotechnology, biosciences, green manufacturing, space based related products, that's our economy for the future. Not centered around appliances. The Europeans recognize this. Obama and McCain recognized this.

Either downsize that plasma screen now, or make a choice between medicine and groceries later. Your choice America.

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Not necessarily. We can keep getting bigger LCDs (well, no one needs Kuro of that size) and get medicine and groceries. It depends on how we adapt our education towards producing the future economy of the US.

SouthernDemocrat said:

It is certainly not inevitable that nations like India and China win on providing skilled services. They will on some, they won't on others. In the example I gave in the previous post, software, Japan has a highly educated workforce and a developed economy, so does Western Europe, yet we still flat out own the software industry. This is despite 30 years of direct competition with them. Why? Because we produce the best software in the world. In the wake of the Dot Com crash many software companies tried to outsource development to nations like India, despite all the computer science graduates India is turning out, the outsourcing effort completely failed because they simply could not compete with American Software Engineers. In fact, there are more IT jobs in America today than there was prior to the Dot Com crash.

There are winners and losers in free trade just like there are winners and losers in capitalism. Just because nations like China have been winners on manufacturing, does not mean that they will be the winners in everything else. Moreover, we benefit greatly from free trade. A couple of months ago I found a 1975 Montgomery Wards catalog at my Mom's shop. Back then, virtually all TVs were made in America. The cheapest 19 inch television in that 1975 catalog was $475 dollars. That would be like paying three grand or more for a small TV today. Since that time, our standard of living has improved and we get the benefit of buying goods much cheaper. The people that were making TVs in American back then are working in other American industries today (and enjoying higher median incomes). Its not a bad trade off.

The fact that we are buying too many things like big plasma TVs is a problem with our over consumption and personal savings rate, not free trade or regulation.

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Two things: I am NOT advocating economic protectionism, nor am I suggesting we return to a manufacturing-based economy. I'm simply a proponent of diversifying our economy by making our market more attractive to businesses regardless of what industry they happen to belong to.

As to your argument, I think you are making a dangerous assumption. We do not know where service-based industries will be twenty or thirty years from now. Assuming the current model will persist is fool-hardy. Just because India and China cannot compete right now says nothing of what they'll look like after they've broken the glass ceiling of their respective developments decades from now.

One thing politicians and economists overlook is economic preemption, especially on the long-term. They base their ideas off of four and six year models because all their considerations are steeped in getting elected and re-elected. Things we see coming forty years down the road don't even enter into our political dialogues. I think this is problematic.

We need to identify and address all eventualities. We need to be willing to make small to moderate sacrifices in order to preempt future calamities. If you want to assume that America will retain dominance in X industry then that is your prerogative, but I think prudence needs to be exercised.

As you have clearly neglected the fact that we'd never have the corner on manufacturing market forever.

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What are you talking about?

Actually this has been occurring for centuries. Every country as it industrializes and develops loses advantage in some areas and gains in others. We took away textiles from Europe. They gained in financial services.
China is more competitive in manufacturing but weak in financials compared to us. Welcome to Economics. This isn't something new. Globalization just expands something that natural occurs in non-isolated markets.

Click to expand...

Welcome to economics? Right...

Anyway, we face a possible loss of competitiveness comprehensively. The technological and economic disparities that allowed America to maintain predominance over the world market are quickly evaporating. It's easy to absorb the effects of global development when our country is flying planes while others are still under British rule. Not so easy when these countries are gaining ground on us technologically and socially.

We can do this without going back to manufacturing of the old sort. Nanotechnology, biosciences, green manufacturing, space based related products, that's our economy for the future. Not centered around appliances. The Europeans recognize this. Obama and McCain recognized this.

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Straw man. I've suggested nothing of the sort.

Not necessarily. We can keep getting bigger LCDs (well, no one needs Kuro of that size) and get medicine and groceries. It depends on how we adapt our education towards producing the future economy of the US.

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Sigh...

I was merely suggesting that Americans should forego luxuries now rather than necessities later.

Ethereal said:

What are you talking about?

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Your argument.

Anyway, we face a possible loss of competitiveness comprehensively. The technological and economic disparities that allowed America to maintain predominance over the world market are quickly evaporating. It's easy to absorb the effects of global development when our country is flying planes while others are still under British rule. Not so easy when these countries are gaining ground on us technologically and socially.

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This has always been the case. Europeans were complaining about us during the 19th century. But you are correct that we face a loss of competitiveness comprehensively, but that's more of an issue of education rather then any real regulatory set or body. We frankly don't produce the kinds of people in sufficent numbers to produce the economy we need. China and Indian produce more engineers then we do by leaps and bounds even as a percentage of their population. It's not good. Nor do we have real financing of scientific programs like the rest of the world. And our education standards are really slipping.

Straw man. I've suggested nothing of the sort.

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In fact you have, specifically by discussing the older forms of manufacturing rather then the new forms of manufacturing that will make up a 21st century developed nation's economy.

I was merely suggesting that Americans should forego luxuries now rather than necessities later.

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We don't need to do either if we can get our *** in line and start producing a solidly 21st century economy centered around high value, hard to copy products like biosciences and nanotech. The fact that McCain (sans Palin) and Obama were candidates is a good notion that we're moving away from the Bush era of thinking that didn't move us to where we need to be.

Ethereal said:

Two things: I am NOT advocating economic protectionism, nor am I suggesting we return to a manufacturing-based economy. I'm simply a proponent of diversifying our economy by making our market more attractive to businesses regardless of what industry they happen to belong to.

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Look, manufacturing did not move to places like China because of taxes and regulation in the United States. The largest cost for any manufacturing company are materials and labor. They can get labor in China for a fraction of what the same labor costs here, union or not. Many of the companies that have outsourced their plants were not unionized.

It is futile to reduce our standard of living and quality of life to try and bring those manufacturing industries back here. Unless we want to allow those companies to pollute in America like that do in places like China and reduce our labor costs to where they are on par with China, then they are not coming back.

As to your argument, I think you are making a dangerous assumption. We do not know where service-based industries will be twenty or thirty years from now. Assuming the current model will persist is fool-hardy. Just because India and China cannot compete right now says nothing of what they'll look like after they've broken the glass ceiling of their respective developments decades from now.

One thing politicians and economists overlook is economic preemption, especially on the long-term. They base their ideas off of four and six year models because all their considerations are steeped in getting elected and re-elected. Things we see coming forty years down the road don't even enter into our political dialogues. I think this is problematic.

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Not nearly as problematic as attempting economic preemption. No one knows what the industries of the future will be. No one knows where the economic battlefields will be in the decades to come. What I do know though is that we are an extremely innovative nation and as long as we remain one, we will be able to compete with any nation on earth for the highly skilled professions of the future.

We need to identify and address all eventualities.

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Millions of professionals in the private sector are doing just that all the time.

We need to be willing to make small to moderate sacrifices in order to preempt future calamities. If you want to assume that America will retain dominance in X industry then that is your prerogative, but I think prudence needs to be exercised.

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I am not assuming America will retain dominance in any one industry. I am saying that you can bet on Americans being able to compete with other nations in the highly skilled jobs of the future so long as we remain the innovative nation we have been. We don't have to make sacrifices to protect ourselves from other economies. In fact, doing so removes a major incentive for domestic innovation, and will only make us less competitive going forward.

I find it pretty ironic that I am taking the free market side when debating an economic issue with a libertarian.

Some more information regarding other countries in the region:

Economy overshadows Asean summit


The impact of the global financial crisis on South-East Asia and worries over food security are expected to dominate talks at a meeting of regional leaders gathering for a summit in Thailand.

Leaders from the 10-member Association of South-East Asian Nations (Asean) began three days of meetings in the beach resort town of Hua Hin on Friday.

Among topics expected to be high on the agenda is the problem of soaring unemployment that has hit the group's export dependent economies as a result of the global downturn.

In a recent report, the International Labour Organisation warned that Asia as a whole was likely to have 7.2 million more jobless people in 2009 than last year, raising the region's jobless rate to 5.1 per cent from 4.8 per cent last year.

FULL STORY

These countries are really going to get f**ked.

SouthernDemocrat said:

--The only way to bring those manufacturing jobs back to the United States would be for us to lower our standard of living to be on par with the wages and working conditions of places like the Guangdong Province of China (whose moto happens to be "The World's Factory"). I would rather keep the 44k a year per capita GDP that we enjoy here with our services oriented economy than the 8k per capita GDP enjoyed by residents of the Guangdong Province, but hey, thats just me.

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I think lessons need to be learned from the German model - even though they are in recession now. Germany remains the world's largest manufacturing exporter - last year in November China overtook the US as second largest manufacturing exporter. However German workers have very strong labour laws, male workers get high levels of paternity leave and rights and manufacturers pay towards their workers medical costs. Your average German manufacturing worker's salary is way higher that that of a Guandong Province worker and probably on a par with an American worker's salary.

The Germans have produced "must have" products for years and have always prided themselves on quality. I admire that in them and wish the British industries that remain could model their manufacturing goals and quality more on the German.

More news as Japans economy continues to plummet...

Japanese stocks skirt record low

Japanese stocks fell in early trading before recovering somewhat, after markets around the world dropped sharply on Monday.

The Nikkei index approached a 26-year-low as bank shares reacted to record losses from US insurance giant AIG.

Rattled by fears that turmoil in the financial sector is far from over, the Dow Jones fell below 7,000 points for the first time since 1997.

The FTSE 100 briefly hit a six-year low and European markets also fell sharply.

The benchmark Nikkei came within 100 points of hitting the 26-year-low of 6,994.90 in the first hour of trade before recovering slightly to 7,204.89 by mid-day.

FULL STORY

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