Timid in Tokyo

Here are some more of those dizzying negative numbers that Edward mentioned: Japan GDP growth preliminary estimate for 1Q 2009.  -15.2% annualized with a 26% drop in exports quarter-on-quarter.  But it’s worth looking at the underlying numbers in some detail.   Concentrate on the 2nd column for 2009 1Q which shows each expenditure component’s contribution to the change in GDP.  Sure, the export decline is scary but it’s moderated by the decline in imports in terms of the effect on GDP.  The main action is coming from a collapse in private non-residential investment — this is not an Irish-style housing construction led crash.  Businesses have pulled back.

Now these accounting decompositions only get you so far.  Weakness in export markets could explain the decline in investment.  But there’s something else.  Contribution of government to GDP change: 0.1 percentage point, against the backdrop of large changes in the other components.  For all the talk of G20 stimulus, this government is sitting on its hands.   With the US, China, and now Australia bellying up to the stimulus bar, perhaps it’s easy for the government to assume that a foreign-led recovery is imminent.  No wonder those Japanese housewives are looking abroad again.