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Economy in Brief

Japan GDP Falls Hard
by Robert Brusca  May 19, 2011

The chart tells a pretty clear story for Japan. Although the quake and tsunami were late in the quarter they exerted a strong negative impact on Japan’s 2011 Q1 GDP. Because of this timing Q2 is sure to reflect further substantial impact from these negative developments.

Japan’s GDP fell at a 3.7% pace in Q1. Private consumption was off at a sharp 2.2% pace. Meanwhile, plant and equipment investment contracted by a very sharp 3.5%.with gross capital formation off at a 3% pace. But one of the big factors impacting GDP was the surge in imports against a tepid rise in exports. . The deterioration in net exports cuts nearly one-half of one percentage point off the GDP (annualized) growth rate in the quarter in Japan. We have seen troubles linger and the crisis over radioactivity drag on. Japan has been managing its problems with an electricity shortage a bit better than originally expected, still these factors will continued to hold back growth in Q2 and beyond.

Japan’s housing investment was positive in Q1 rising at a 2.9% paces (SAAR) quarter-over-quarter. But domestic demand fell by 3% and fell for the second quarter in a row, having dropped at a 2.7% pace in Q4 of 2010.

While it is being said that Japan has slipped back into recession, today’s report did not rock markets. And while it is probably is true that Japan is back in recession it is also in a particularly artificial one with a lot of resources dedicated to help dig it out. The plunge in GDP was created by a disaster, not by economic excess gone amok. Japan’s economic statistics are going to continue to look a bleaker in the next quarter than Japan’s prospects really are. The Japanese are a determined people and they will pull themselves out of this catastrophe with greater ease than they extricated themselves from their lingering period of deflation.

Japan's GDP
    Consumption Capital Formation Trade  
  GDP Pvt. Public Gross
Fix Cap
Plnt&
Equip
Housing X-M:
bns E
Export Import Domestic
Demand
% Change Q/Q at Annual Rates of Change; X-M is Q/Q Change in Blns of Real Yen
Q1-11 -3.7% -2.2% 3.9% -3.0% -3.5% 2.9% -0.6 2.8% 8.2% -3.0%
Q4-10 -3.0% -3.9% 1.5% -2.8% 0.5% 13.3% -0.5 -3.3% -1.3% -2.7%
Q3-10 3.8% 3.3% 1.3% 1.8% 4.4% 8.0% -0.3 6.6% 12.2% 4.6%
Q2-10 0.2% -0.6% 5.0% 2.9% 11.2% -2.2% 1.9 22.4% 17.3% -0.6%
% Change Yr/Yr; X-M is Yr/Yr Change in Gap in Blns of Real Yen
Q1-11 -0.7% -0.9% 2.9% -0.3% 3.0% 5.3% 0.5 6.7% 8.9% -0.5%
Q4-10 2.4% 0.6% 1.5% 1.4% 5.4% 6.1% 4.6 13.1% 9.8% 2.0%
Q3-10 4.8% 2.3% 2.1% 2.9% 6.6% -1.1% 9.0 21.1% 11.3% 3.5%
Q2-10 3.3% 1.5% 2.9% -0.5% 3.0% -10.5% 12.3 29.8% 14.2% 1.5%
5-Yrs -0.3% 0.0% 2.1% -3.3% -2.0% -7.1% N/A 1.7% -0.1% -0.6%
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