Early Warning Sign: Japanese Economic Recession Confirmed

by | May 19, 2011 | Headline News | 29 comments

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    The global economy is on thin ice as Japan reports a significant drop in first quarter growth. Analysts estimated the decline would be about 1.9%. The official number came in at 3.7%, almost double what was predicted. This is the second quarterly GDP decline for Japan, which showed a 3% drop in the fourth quarter of 2010, making their recession official.

    The Japanese Tsunami and subsequent nuclear crisis following the March 11 earthquake is likely to blame for the unexpected (by mainstream analysts) drop. Those remaining 20 days in the first quarter seem to have been very bad for the Japanese.

    We shudder to think what may happen to second quarter GDP growth in Japan, as well as corporate earnings for Japanese and American companies alike.

    Computer company HP has already reduced their earnings outlook for the rest of the year citing near-term problems resulting from the Japan earthquake and related events. They won’t be the last.

    The March disaster hit an economy already weighed down by years of deflation and subdued consumer spending, and slashed profits at companies including Toyota Motor Corp. as factories were shut. The economy may further contract in the second quarter before rebounding later this year as reconstruction spending kicks in.

    “The contraction in the second quarter will probably be even bigger as consumer spending and exports slump,” said Norio Miyagawa, senior economist at Mizuho Securities Research and Consulting Co. in Tokyo.

    Source: Bloomberg

    Analysts well known for not only smoking, but also pushing optimism opium on the masses, expect the Japanese recovery to return to normal some time later this year:

    “The economy will likely return to growth from the third quarter once the supply-chain disruption eases and reconstruction work begins.” [Norio Miyagawa]

    The economic contraction may only be a “temporary phenomenon,” and two straight quarters of shrinkage “doesn’t necessarily mean the economy’s trajectory has changed,” Kaoru Yosano, the economy minister, told reporters today.

    The economy will probably contract at a 3.3 percent annual pace this quarter, and then resume growth the next two quarters, according to the average forecast of 43 economists in a survey by the government-affiliated Economic Planning Association released on May 16.

    “We look for a classic V-shaped recovery in the July-to- September period and after,” said Kyohei Morita, chief economist at Barclays Capital in Tokyo. “A self-sustaining recovery in production, an increase in government consumption and reconstruction demand centered around public works will likely support the economy.”

    If the 43 economists analyzing the second quarter are the same as those who made the first quarter predictions, we can conclude with a fair degree of confidence that things are going to get notably worse.

    Financial alternative news web site Zero Hedge points out what the rest of the professional economic analysis world simply refuses to say:

    Confirming once again that Wall Street economist (and sell side in general) is the most useless profession in the world (though gladly accepting a 7 figures compensation), is the latest data out of Japan which is yet another stunner to most, as nobody, nobody, could have possibly predicted that the Japanese economy would literally fall off a cliff in Q1, plunging at a 3.7% rate (down from -3% previously), which is double the consensus print of -1.9%. DOUBLE. And in nominal terms the collapse was simply epic: -5.2%! And yes, this is officially a recession. Of course, anyone reading Zero Hedge would have been perfectly aware of this outcome. 4 short days ago we said: “Increasingly we have come to believe that the real marginal economy over the next several quarters will be neither that of the contracting US, nor that of the rapidly tightening, yet still very much inflationary China, but the (arguably) third largest one: that of Japan.” Today our prediction is more than confirmed. And instead of hiding deep in the whatever holes these morlocks cralwed out of, Bloomberg for some inexplicable reason continues to look to their blatantly horrendous opinion. “The negative economic impact from the disaster will be on full display during the second quarter,” Hiroshi Watanabe, a senior economist at the Daiwa Institute of Research in Tokyo, said before the report. “This recession may be deep, but short.” Yeah, sure. Short. We’ll just hold our breath.

    Let’s hope the Economic Planning Association and not Michael Ruppert are correct with their assessments, because a worst case economic scenario resulting from the Japanese nuclear crisis, as was described in Collapse Countdown Clock: “We Have Until July”, could very well precipitate the collapse that our benevolent leaders are working so hard to avoid:

    Michael Ruppert Emergency Action Alert [April 14, 2011]

    This is an emergency action alert. This is probably the most important one, and the easiest one in terms of being able to figure out, that I’ve ever put out before. We have until July, at the latest, to prepare for complete economic pandemonium along with all the social unrest that has been building and fomenting and is now breaking out, even though the mainstream is trying to hide it.

    What we look for now is the first three month period of operation around the world for corporations after the earthquake. You will see most of those earnings reports being published between June and July of this year…

    …that will not be able to be hidden. The impact of global GDP will be devastating. The United States especially, Canada.

    …that is something that will send the markets absolutely into a panic because the markets are totally over-leveraged. Everything has been banked upon growth, GDP growth. Japan has in effect killed growth around the planet. It may have killed the global economy because that event is not over and we don’t know how much damage is yet to be done as a result of the radiation to that country and around the world.

    Could Japan really be the trigger?


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      1. Spending billions to replace cities you already had is quite stimulative for the economy. USA should evacuate cities and carpet bomb them to rescue our economy. Much more efficient than breaking a few windows.

      2. @ Terry

        Why don’t we start in D.C. before the prescribed evacuation?

      3. Japan has been in a RECESSION since the 90’s – HELLO , look up “Japans lost generation!” The only reason Japan is still afloat is because it OWNS all it’s own debt and part of america’s! Hello! Japan will survive this fofr one reason only the destruction of the country will stimulate i’s dead economy through reconstruction!

      4. I for one dont think its over,
        in Japan

      5. They’ve already bombed Detroit back to the stone age.  Half the population cannot read…


      6. Michael Rupert has some interesting theories but he is 75% wrong with his predictions just as most of the other doom/gloomers out there. Everything is fine. The news doesn’t even cover Japan anymore which probably means everything is under control and fixed. The dollar is out performing precious metals, how can it be that the U.S. dollar is done with? I believe that gold/silver is another huge bubble that will take another plunge later this year.

      7. It’s a government generational family tree thing but they can still play a good song about a goober union building a car that the few can afford or steal.  Maybe Mo Town Motor City was just ahead of their time. 

      8. “The dollar is out performing precious metals, how can it be that the U.S. dollar is done with? I believe that gold/silver is another huge bubble that will take another plunge later this year.”

        You probably believe in the tooth fairy.  You’re voted off the island to attend Detroit junior college economics developmental class (non credit) 100 by the government lib teachers OR go out and spend some of your fiat dollars to mine some PM’s.  See which one is easier.  You’ll go the easy route again. 
        You know what FINE stands for right?

      9. Hey Mushroom did you change your name to DigiRonin?

      10. The numbers don’t lie. Look at the Dollar Index today, it’s still over 75. That’s more than it was weeks ago. Things are not as bad as most people on this blog make it out to be. As long as the Fed keeps QE going, we’ll be ok. Hyperinflation is just a theory, a myth. Also, Congress will keep raising the debt ceiling which will buy this economy more time. I don’t think other countries will dump U.S. dollar as fast as expected. The world fears the U.S military and therefore are basically held hostage. China is over estimated as well. They may have a booming economy but have no experience in warfare other than Sun Tzu strategy and tactics.

      11. We continue our slow descent into the abyss.  Or at least the corporations do.  We just happened to watch Japan start sinking faster than we are.

      12. Granted that Japan has financed itself internally, but … they hold a lot of US Treasuries that they will be forced to sell for the rebuilding efforts. Dumping these on the market will tilt the supply/demand curve. With T-bills already at virtually zero interest, this will either force a raise in the interest or result in heavy discounts for T-bills. Either option will cause more financial pain for the US citizenry.

        Now consider the effects on future T-bill auctions and what this means to other countries holding US Treasuries. China is already slowly reducing their exposure by unloading US T-bills. If Japan dumps T-bills, the US will be confined to dumpster diving and lose its status as the reserve currency.

        Now you know why the US is so heavily involved in the post-tsunami efforts. It is all about self-defense of the dollar.

      13. Digiruined,
        Sun Tzu’s tactics have been working for thousands of years. Don’t knock ’em.

        As for your blind faith in the dollar, do you think TPTB are going to tell you the sky is falling. They’ll tell you the sky’s the limit, but IT JUST AIN’T SO! The fiat money scam they’ve been pulling has to crash sooner or later. QE literally means pumping our banks full of counterfeit money to make them look better.
        With a printing press and the right plates I could spend the rest of my life printing fake 100’s, and I still wouldn’t hurt the economy like the Fed is doing every month!

      14. So whats the harm in pumping funny money into the banks? Money still circulates and still can be used to pay the bills and buy things. Also, people can just prolong being poor by just using credit cards. It doesn’t make sense to me that the US can ever default on its own debt, especially the Fed can keep QE’ing and buy up US bonds.

      15. It is less of a problem to be poor, than to be dishonest.

      16. “The numbers don’t lie”.  What numbers are those?

      17. DigiRonin,  where to begin?  Hyperinflation is just a theory?  Ask the Germans about Weimar.  Ask the Zimbabweans.  They’ll tell you it’s not just a theory.  When you’re wiping your butt with a ten dollar bill because it’s cheaper than toilet paper, I assume you’ll post back here about why it’s not just a theory after all.  How is “buying more time” by raising the debt ceiling going to help?  Congress and the Executive will do nothing that will help, even if they have more time.  If they were going to do anything other than drive this country off a cliff, they would have changed course by now.  As far as fearing the US military, they are right to do so, because it is controlled by maniacal whackos.  However, the US military runs on oil.  So much oil that it uses more than most countires.  If the dollar becomes worthless (because other countries dump them) how will the US military pay for it’s fuel?  The US does not have the manpower to conquer and occupy the oil fields.  They can’t even conquer Afghanistan.  Not to mention all the fun the US gov’t and its military will be having back home when the purchasing power of our money goes to zero.  The unrest back home will keep them quite busy.  Too busy to go around to Russia, Brazil, India and China trying to force our dollars on them.  Who told you the Chinese have no experience with war?  Do you think they just forgot the Long March with Mao?  Do you think they just forgot Korea?
        Sorry, your overconfidence seems a bit misplaced to me.  Congress will continue to borrow and spend until no one will lend and we go over the cliff.  The Fed will continue to print dollars until they become worthless.  We are facing an economic melt down of epic proportions, and very few are doing anything to avert this disaster.  As for as the Dollar Index, weekly or monthly changes in the Dollar’s value as compared to other fiat paper currencies is NOT a sign of prosperity, or even a cause for hope.  It cannot hide the fact that the purchasing power of the Dollar has gone down year after year since the beginning of the Federal Reserve.  It will continue to go down until it reaches zero, and something else will be used as money. 

      18. So when do you propose this economic collapse really hit rock bottom? People talked about all these doom/gloom scenarios years back and yet nothing has happened, nor has anything changed for the better. If the U.S. is as bad as everyone here makes it out to be, then why do we swarms of illegals entering this country from Mexico and Asia? Sure all the jobs are now overseas in China and India but you still have more and more people from China and India dying to be here in the U.S.?

      19. Comments…..japan can take care of japan…american companies need to return to the usa. and americans need to get to work and become industrious again. we gotta get all these foreign countries out of our pockets and start doing for ourselves.

      20. How many at a time and how long can the Chinese march off of a cliff and still have enough soldiers to fight a war?  We will find out.

      21. caryn, not until our dollar is doomed or our politicians grow a pair.  Which do you think will happen first? 

      22. Instead of raising taxes they “borrowed”money from the Civil Service Fund.Even though it includes the Senate and House of Representatives,THEY were given a EXEMPTION on THEIR funds being used to reduce the Debt.Just waiting to see how far the farce will continue untill TAXES are finally raised.If ever.Perhaps when it’s already too late.Best thing about this whole collapse of the American Empire that China and all the rest will be there on the next bus as well(I.E. they’re actually almost as bad off as us).Foxconn will have little need for their workers if Americans cannot afford the electronic toys Foxconn sells.Wonder what the workers in the Peoples Republic will to w\o jobs and money to get food?
        Would rather be here than there any day…..
        Best to All

      23.    DR is right. We can keep printing dollars as long as we want and everyone in the world HAS to accept them because they are umurikin dollars and they are special. umurika is booming, you people all just like to say you are having trouble making ends meet. There is NO inflation (just do not eat or use any kind of energy). Everything is fine, nothing to see here.

      24. Digronnin:

        I don’t mean to be rude but you’re ignorant.  You think we hold the world hostage becuase of our military.  Everyday we devaule the reserves that China and other countries have at the same time exporting inflation to them.  You think that $trillion dollar deficits and debt don’t matter, why don’t you read history.  There have been dozens of cases of currency collapses and hyperinflations, Iceland most reecently.  There has never been a fiat currency that survived debasement.  If we stop printing  interest rates will rise and our debt service will collapse our economy, if we continue easing inflation will spiral out of control.  why don’t you try reading a little more.

      25. I don’t see any signs of inflation here in New York to be honest. Gas prices are stabilized at $4.25/gallon on average. Tthe U.S. has the ability to print dollars to infinity, while other countries cannot and therefore their currency collapses. If the dollar has survived this long already, it highly unlikely that it will fail at this point. The average person will become more poor and suffer. That is the way things are and will be and no one is going to stand up and change that.

      26. You just made my point. “printing dollars to infinity” decreases the purchasing power of those dollars.   The definition of inflation is “too many dollars chasing goods”  do you think China and our other creditors like watching their dollars lose value?  Why would they continue to invest in our treasuries when we’re exporting inflation to them.  They are purchasing large amounts of gold because it can’t be inflated.  Look up the hyperinflations of other countries.  According to you there is no consequence to money printing.  If that’s the case, why are we the only western country not tightening interest rates.  all the other countries are raising rates to ward of rising inflation.  If money printing was benign countries would print quadrillions of dollars but they don’t.  Our debt based monetary system will collapse.  Maybe with deflation first, but they will print us into hyperinflation.  History shows that


        Numbers don’t tell lie…yes right.

        Gold price, Oil price…price of commodity…don’t tell lie, either

      28. @DigiRonin
        “The world fears the US military..” who does? Oh thats right only 3rd world countries that the US has not already engaged in “War” with and how many “wars” has the US won?  NONE!!! Beaten by every country they have engaged with…. Digi…I really feel sorry for you and if you have children you are killing them by being asleep at the most important time in the worlds history. If you have kids ( God forbit you reproduce.) Wake up stop watching Dancing with the Stars and learn to read so you are not filled with the garbage coming out of your best friend…yes the idiot box.  I’ll give you one chance for survival….send me your # and I will employ you at Minumum wage when SHTF to save your kids. Thats if you can still afford to pay your phone bills.

        Damb, all this typing to someone who can’t read and comprehend.

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