The Modern Tokyo Times

International news and neglected issues

Economic growth in Japan but external factors remain troublesome

Economic growth in Japan but external factors remain troublesome

Joachim de Villiers and Lee Jay Walker 

Modern Tokyo Times

The economy of Japan despite all the scaremongering continues to show great resilience and this is despite many massive internal and external factors. Of course, the events that unfolded on March 11 led to major economic convulsions and the loss of life was enormous but on top of this is also the global economic situation. Therefore, for Japan to rebound when America and the European Union are suffering so much is also remarkable.

Tens of thousands of people died because of the potent and deadly tsunami which was unleashed by the 9.0-magnitude earthquake. This was followed by a huge nuclear cloud which hung over Japan and the mass media didn’t help. Therefore, many embassy staff fled alongside foreign nationals and this uncertainty put enormous strains on the economy.

Also, for major manufacturing companies who were based in the areas hit by the earthquake and tsunami, it was essential to restructure and solve the huge cog in the machinery which was hindering the supply chain. However, corporate Japan and the government pumped vast sums into the economy and the banking system. Therefore, a huge capital base was built in order for Japanese companies to obtain funds internally (applies to companies hit by March 11) and also to expand internationally because of the strong yen.

Not only this, the weakness of the American dollar and the Euro meant that exporters would have been hit badly during natural economic events. Yet despite everything, including typhoon Talas which killed many in Wakayama and other prefectures, Japan’s economy is showing signs of economic growth and a rebound was announced.

This applies to gross domestic product growing by 1.5% and while the government of Japan can’t rest on these laurels, it is still a remarkable achievement given the reality of 2011 in Japan. Of course, the ill-winds of America and the European Union will continue to hinder further economic progress but a base is being built and stability is the first step after such internal disasters this year related to nature.

In an earlier article by Modern Tokyo Times it was stated that If you want to study about the uniqueness of Japanese capitalism and how companies respond to enormous adverse conditions, then the Tankan survey by the Bank of Japan will make you fully aware. After all, the devastation caused by March 11 and the ongoing crisis at the Fukushima Daiichi nuclear plant would have caused most nations to bow down to mass uncertainty.  However, welcome to corporate Japan where the response may seem slow but once the juggernaut starts, then it eats into the crisis and returns to normal.”

“Let us also remember that unemployment in America remains within the 9% range to just below 10% despite enormous debt borrowing and having no internal devastating consequences to face.  Also, remember, that the dollar is very weak and should be helping exporters but in Japan the opposite is happening because the yen is too strong and causing many problems.”

“However, unemployment in Japan is falling despite all these negatives to below 4.5% and it is Japan and not America which is trying to help the European Union and crisis hit Greece.  This applies to buying more Eurobonds and making it fully aware that Japan will step in and help Greece providing a sound economic policy is put on the table.”

Therefore, the announcement that Japan’s economy is picking up is remarkable given the adverse conditions but sadly the economic situation isn’t out of the woods. This applies to external factors like the high yen; the sluggish global economy; recent floods in Thailand hindering Japanese companies with regards to the supply chain; the ensuing crisis in Europe and the “Euro cloud;” and other factors.

If the global economy was in a healthier condition and the international exchange rates of major currencies were based on realism; then Japan would have more hope for optimism. However, it is hard to imagine other nations rebounding so quickly from such a traumatic event and for this fact alone it is clear that Japan can recover quickly from major internal convulsions.

The next quarter may show that all is not well because of external factors and consumer spending internally remains problematic. Yet the scaremongering of the demise of Japan can be seen for what it was.




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