Depression In The East Points The Way For The Rest Of The World (Larry Elliott)

  Feb. 25, 2009 (Guardian) -- Anybody who doubts that the global economy is facing its most serious downturn since the 1930s should take a squint at the latest trade figures from Japan. Exports in January were 46 percent lower in January than they were a year ago -- a phenomenal drop for a country that is so heavily dependent on sales of its industrial products overseas.

  Japan has got used to economic setbacks over the past two decades: it has been in and out of recession on a regular basis. But make no mistake, this drop in exports does not mean recession: it means depression.

  In the circumstances, comments by analysts that the data was "not good" and "seriously bad" were somewhat otiose. The Office for National Statistics confirmed today that the UK economy shrank 1.5 percent in the final three months of 2008 and is on course for an annual decline in GDP this year of between 2.5 percent and 3 percent. But in Japan, things are much, much worse. Maya Bhandar at Lombard Street Research, says that the economy is contracting at an annualised rate of 14-15 percent in the current quarter. Strong exports have tended to disguise the weakness of Japanese domestic consumption in recent years: now that prop has been kicked away, growth is plummeting.

  Why is this happening? Quite simply, the great engine of globalisation has gone into reverse. During the long boom, the US acted as the consumer of last resort: it sucked in exports from China and Japan. As China industrialised, it needed high-grade investment goods from Germany, and as prosperity spread in the world's most populous country, there was strong demand for Japanese electronics, cars and consumer gizmos. Now that America has stopped spending, Chinese factories have closed. The knock-on effects of that are being felt in Tokyo and Hamburg.

  In Japan, all the main industries are reporting decreases in exports of more than 40 percent. The big car companies -- Toyota, Nissan and Honda -- are really feeling the pinch: overseas sales by the transport equipment sector were down almost 54 percent on a year ago. What's more, car sales are slumping everywhere: J­apanese exports to North America, Europe and the rest of Asia were all down by more than 50 percent.

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