Japan faces `unimaginable' contraction
http://www.ft.com/cms/s/0/97ad993c-f6b9-11dd-8a1f-0000779fd2ac.html
Published: February 9 2009 15:04 | Last updated: February 9 2009 18:46
Japan's economy faces an "unimaginable" contraction, the chief
economist of its central bank warned on Monday, as figures revealed
surging bankruptcies and a big fall in machinery orders.
The warning from Kazuo Momma, head of the Bank of Japan's research and
statistics department, underscored the gloom surrounding the world's
second-largest economy as export orders dry up, companies shut down
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Japan, where industrial output plunged a record 9.6 per cent month on
month in December, is due to announce fourth-quarter gross domestic
product data next week. Polls of economists suggest GDP will have
fallen more than 3 per cent compared with the previous quarter - an
annualised decline of more than 10 per cent.
"From October to December the scale of negative growth [in GDP] may
have been unimaginable - and we have to consider the possibility that
there could be even greater decline between January and March," Mr
Momma said in a speech on Monday.
His remarks came as a private research company reported a 16 per cent
year-on-year rise in the number of bankruptcies among Japanese
companies to 1,360 in January, the highest level for six years. Total
debts left by failed companies rose 44 per cent from a year earlier to
Y839bn ($9.2bn), Tokyo Shoko Research said.
Many of Japan's companies have suffered from the domestic slowdown and
a sudden dearth of demand for exported goods including cars and
electronics, as well as problems securing credit from banks. The
effect on companies' capital spending has been marked, with core
private-sector machinery orders plunging 17 per cent quarter on
quarter in the three months to December, the steepest fall on record.
The month-on-month fall in core machinery orders in December was down
just 1.7 per cent - less than expected - but economists drew scant
comfort.
"Even after this slightly better-than-expected showing, orders were
still down by just under 27 per cent compared with a year earlier,"
said Ben Eldred of Daiwa Securities.
"The inescapable conclusion [from recent data] is that the Japanese
authorities need to do more...if the Japanese economy is to avoid
becoming the worst affected of all the developed economies from the
current global downturn."
The Japanese gloom was replicated in Taiwan, Asia's sixth-largest
economy. In January exports fell by 44.1 per cent from a year ago, the
biggest decline since government records began in 1972. It was the
fifth consecutive month that exports have shrunk.
Additional reporting by Robin Kwong in Taipei