Japan's economic contraction supports gov't policy action

By Leika Kihara and Kaori Kaneko

Politics Feb. 15, 2013 - 06:06AM JST ( 2 )

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herefornowFeb. 15, 2013 - 11:55AM JST

Japan’s economy unexpectedly contracted in the fourth quarter,

Three quarters of contraction in a row. Tobe, hopefully, followed by a "slow recovery". Yikes. Japan Inc. is really in dire straits.
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flowersFeb. 16, 2013 - 06:05AM JST

By driving down the yen and expecting the exports to improve, this may be a wishful thinking. The impact on production costs will be more significant as Japan imports raw materials more in USD, as such the costs of production will be higher which will lead to higher prices. As inflation sets in there will be a contraction on consumer spending that is why J govt has asked businesses to raise wages so that consumer would spend more than they would save. However, businesses will resist raising wages and considering the mentality of the Japanese they will rather save than spend so in the long run the economy will not see much improvement. Also, because export markets will not change much in the short run, Japan will have to rely more on China market to get itself out of recession. Japan will need to improve its image in China so that Chinese consumers can accept Japan once again.