· Officials in Japan have become more worried in recent weeks even saying that they cannot be sure that the economy is not now in recession. It’s GDP for 2008-Q2 tells that story. GDP is declining at a weak 2.4% pace in Q2 (Saar). The Yr/Yr pace of GDP growth has slowed from an already weak 1.4% in 2007-Q4 to 1.2% in 2008-Q1 and now to 1.0% in 2008-Q2.
· Private consumption is falling at a 1.9% pace. Gross fixed capital formation is falling at a 6% rate. The investment rate for capital equipment is -0.9% and for housing it’s a very weak -13%. Trade is making a small subtraction from overall growth as imports are dropping at better than a 10% rate as exports are falling at a nearly 9% ate. That results in a GDP subtraction because exports are so much larger than imports in real terms than the smaller percentage decline in exports is still a larger drop in real terms than the drop in imports.
· Moreover, domestic demand in Japan is falling at a 2.5% annual rate in 2008-Q2 and is falling year/year for the second quarter in a row. No wonder Japan’s authorities are concerned and stimulus package is being prepared.