Tuesday, September 11, 2007

Global Recession: Japan is an anchor not a life preserver

Japan's economy SHRANK in the April-June quarter by 0.3% (real GDP), an annualized 1.2% drop. Ten year JGBs fell to 1.5%, an 18 month low. Not exactly boom-time in Nippon. The odds of a global recession are one in five in my view, and growing. Yes, I know, I am a humble non-economist blogger whilst those dazzling prognosticators (brokerage analysts) are all in agreement that even if (oops, when) the US goes into recession, the global economy will be fine because of Japan, Europe, and EM. But these are the same clever fellows who a mere six months ago thought the US looked fine and that the housing problems were (beg your pardon) contained. One thing should now be clear for everyone: Japan is barely growing now and when US imports slow, is in serious danger of recession itself. One pillar of the "who needs the US consumer" global growth story has fallen.

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