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Economic Woes Plague Japan

June 1, 2009

Background: The U.S. economic news hasn’t been that bad, lately. Just last week was released some of the most promising consumer confidence numbers since the recession began, and the stock market has been slightly gaining over a period of time. In fact minus the effects of the Swine Flu, and some people might say the U.S. economy is showing signs of recovery.

Not so in Japan. The effects of the recession that have already taken hold have been exacerbated by the Swine Flu. Japanese consumers are reacting radically, and profits for Japanese companies are getting redder. The newspapers this morning summed up the economic woes “plaguing” Japan.

Asahi: Demand Gap, Worst Ever While the U.S. heavily relies on the GDP indicator only, the Japanese tend to focus on the Demand Gap indicator, which is a combination of the supply (employment + capital investment from companies) and the demand (GDP). As this is the Japanese main economic indicator, after it’s been released, consumers and businesses are buzzing.

The June 1st release of the indicator was the worst on record. The lowest ever was -5.0%, set in the first quarter of 1999. The demand gap for the first quarter of this year was -8.5%. The Asahi sited world demand for exports subsiding and negative profits for companies hitting consumer wallets as reasons for such a low economic statistic.

Nikkei: The Swine Flu Hits Profits The department stores released their profits for the month of May. Compared to last year, they had an alarming drop of 12-16.8% in profits. The Nikkei stated since the Swine Flu has hit Japan, there has been a large increase in consumers unwilling to shop outside their homes.

To drive the point home, the Nikkei cited the department store Daimaru in Kobe City had an incident of Swine Flu confirmed within its doors. Since the incident, the store in Kobe City has seen a 22.4% drop in customers, along with other customers at other branches dropping on averages close to 20%.

Yomiuri: Car Sales Hit The Yomiuri reported that domestic car sales in May decreased by 9.2%, compared with April. It’s important to keep in mind that this is in the background of a tax break issued by the government. As the Yomiuri states, in April the government issued an “eco car tax break” for consumers. It wasn’t all bad news, despite Toyota’s 22% drop in profits and Nissan’s 9%, Honda’s sales were at a positive 4.5%.

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