Though it may be one of the largest economies in the world, Japan, owing largely to the global economic recession and a series of natural disaster over the past year, saw its economy shrink "more than expected" in the last quarter of 2011, according to recently released figures.
While the country has been reeling from the 2011 tsunami that hit off the country’s northern coast, severe floods in Thailand, one of Japan’s main suppliers where many of its largest firms have production plants, also affected the country’s economy by almost 0.6 percent.
According to figures released by Japan’s cabinet office, the country’s GDP has shrunk by around 2.3 percent, much higher than the previously forecasted 1.4 percent.
Commenting upon the figures, analyst Martin Schulz of the Fujitsu Research Institute said, "The economy is slowing down by more than what was expected,” adding, “The slowdown of exports is taking a heavy toll on industry."
Analysts have cited various reasons for the slowdown of Japans’ economy. Of course, these begin with America. Being one of the largest importers of Japanese goods, the US is dealing with its own recession and in turn having a ripple effect on the global economy. This effect has also been seen to affect other large Asian economies such as China and India, with a noted decrease in the countries’ respective growth rates.
Troubles in the eurozone have also contributed to the global recession with consumer demand on the decline.
Another pressing concern that has been cited is the rising strength of the Japanese yen, which has seen a near 7 percent rise against the dollar since April of last year. This has of course affected the way Japanese firms conduct business abroad as well as deterring foreign buyers.
Of course, the 2011 Japan tsunami and the floods in Thailand proved to be very damaging, as production for many of Japan’s largest firms either slowed down or was halted completely.
Cumulatively, all these factors have been responsible for the gearing down of Japan’s economy, something that analyst Hiroaki Muto of Sumitomo Mitsui Asset Management says may not recover for a while owing to how other Asian economies are performing.
"This is a contraction driven by external demand. Exports have fallen a lot because of a triple shock from Europe, the strong yen and floods in Thailand. Unfortunately we can't be as optimistic about exports, because Asian economies are slowing and it will take time for the US to recover," Muto said.
However, even though the figures were not as favorable as expected, they had little effect on Japanese markets, as the Nikkei 225 index closed 0.58 percent higher.