US sweats as Japan's GDP drops at 13% rate
Feb 16th 2009 5:26AM
Updated Dec 4th 2009 10:54AM
Economic growth in Japan is dropping faster than it is in the United States, United Kingdom, or European Union. The question is whether Japan's situation is unique or whether its troubles will spread to the rest of the developed world.
According to Reuters, "Japan sank deeper into recession with its worst quarterly contraction in 35 years." To blame were, "its reliance on exports and soft domestic demand." Japan's economy is now contracting at an annual rate of about 13%.
Japan relies more on exports than the US does. For the time being, that is good news for the American economy, but the benefit may end if consumer consumption continues to fall.
Heavy buying of goods and services by the US middle class has allowed what is made in America to be sold in America. But the more domestic consumption weakens, the more the US economy looks like Japan's.
No matter what American consumers do, US exports remain critical to GDP expansion. Much of this is driven by products from the tech, airplane manufacturing and defense industries. Demand for production from all of those industries is shrinking as business spending hits a wall in almost every large country around the world.
Up to this point, consumer spending has kept the US off the course that has taken the Japanese economy down so quickly. That American advantage may not last.
Douglas A. McIntyre is an editor at 24/7 Wall St.