Japan GDP shrinks 12.7% in biggest dive since 1974 as exports collapse

news.yahoo.com : Japan's economy shrank in Q4 2008 by its most since the first oil crisis in 1974, hit by an unprecedented slump in exports, which is likely to lead to more calls for extra stimulus. Japan's economy shrank 3.3%, or an annualized 12.7% in Q4 2008. With exporters cutting production and laying off staff and many retailers reporting sharp falls in sales, economists saw little hope of a bounce back for Japan. The big slide in Japanese GDP was its second-worst in modern times, lagging only a 3.4% contraction in 1974, after the first Middle East oil shock. A plunge in exports was the main culprit behind the massive Japanese contraction. The subsequent build-up in inventories of unsold cars, flat-screen TVs and many other goods has forced Japanese manufacturers to halt factory lines, pushing industrial production off a cliff. Wary of mounting problems for Japan's economy, the BOJ has nudged interest rates down near zero, taken some unconventional steps including buying of commercial paper, and set up a new funding scheme using corporate debt as collateral. - To be sure, as yet this 12.7% number is an annualized figure based on quarter-on-quarter results, but if (/when) it does dip into the negative double-digit territory year-on-year, one could probably declare that Japan's economy has gone straight into the Second Great Depression. Since Japan does happen to have the world's second largest economy, if Japan itself is falling into an economic depression or what looks more and more likely the case, an economic collapse, the rest of the world particularly Asia can't be that far behind. See also : 1. Japan GDP shrank annual 3% in Q2 2008, revised figures show 2. Nissan to slash 20000 jobs in mass layoff, sees annual loss in 2009 3. Japan exports plummet record 35% as recession deepens 4. Toyota to cut production 54% in Q1 2009 as demand plunges