Global| May 19 2003Deflation Intensifies in Japan
Summary
Data released last Friday show that GDP in Japan rose 0.01% in real terms in the first quarter of 2003 while in nominal terms it declined by 0.62%. The deflator, which has declined in every year since 1995 with the exception of 1997 [...]
Data released last Friday show that GDP in Japan rose 0.01% in real terms in the first quarter of 2003 while in nominal terms it declined by 0.62%. The deflator, which has declined in every year since 1995 with the exception of 1997 declined by 3.85% in the first quarter. The attached chart shows the widening gap between the real and nominal GDP in Japan.
Japan is in the throes of a vicious cycle of deflation where bad debts grow faster than the economic system’s ability to deal with them. Over the past weekend the government announced that it would inject 2 trillion yen ($17 billion) into Resona, the country’s fifth largest bank, to return it to solvency. Such measures may provide some short-term relief, but eventually more fundamental changes will have to be undertaken if the Japanese economy is to emerge from its deflationary cycle.
| Q1 2003 | Q4 2002 | Q/Q | Y/Y | 2002 | 2001 | 2000 | |
|---|---|---|---|---|---|---|---|
| Nominal GDP (Trillion Yen) | 496.1 | 499.3 | -0.62 | -0.92 | -1.16 | -0.78 | 0.14 |
| Real GDP (1995 Trillion Yen) | 543.6 | 543.5 | 0.01 | 2.50 | 0.46 | 0.82 | 2.13 |
| GDP Deflator | 89.9 | 93.5 | -3.85 | -3.54 | -1.69 | -1.42 | -1.94 |
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