Japan has followed the U.S. into every recession in the past three decades. This time may be different.
Since 1970, when the U.S. accounted for 30 percent of Japanese exports, each of its five recessions triggered a decline in Japan's shipments abroad. Now, that figure is only 20 percent, reflecting the success of companies including Toyota Motor Corp. and Hitachi Construction Machinery Co. to take advantage of the opening of Chinese and Russian markets.
Japanese companies have also streamlined production and reduced debt since the bursting of the late-1980s stock and property-price bubbles that ushered in more than 10 years of stagnation. The result: The world's second-largest economy is better positioned to withstand a slump in the biggest economy.
``The U.S. is no longer the absolutely dominant market it used to be,'' said Julian Jessop, chief international economist at Capital Economics Ltd. in London. ``Japan itself is in much better health. It's transformed itself after the lost decade.''
This month the two most bearish brokers on Japan -- Goldman Sachs Group Inc. and Morgan Stanley -- backed off from predictions that Japan would slide into a recession this year.
The catalyst was an April 17 revision to figures for February industrial production that showed output rose to a record rather than fell.
Interest-Rate Shift
By the end of that day, bets the Bank of Japan would lower its key overnight rate by year-end had fallen to 4 percent, down from 71 percent on March 20, according to calculations by JPMorgan Chase & Co. Now investors see an 83 percent chance of a rate increase by December.
``I had to retreat from my call,'' said Takehiro Sato, chief Japan economist at Morgan Stanley in Tokyo, who since February had been predicting a dual U.S.-Japan recession. He now predicts Japan's economy will go through a ``soft patch.''
Goldman, which since January had been telling clients that Japan was already in a recession, now forecasts the economy will expand at an annual rate of about 2 percent in the first quarter. That would match the average growth over the past five years.
Exports have risen in each of the past seven months, even as shipments to the U.S. fell. Shipments to China grew 45 percent in the past two years. Those to Russia doubled.
Toyota Sales
A 5.6 percent drop in U.S. vehicle sales didn't stop Toyota's total unit sales from rising in the first quarter. Last week its president, Katsuaki Watanabe, made his first visit to the Beijing Auto Show. The carmaker forecasts sales in the world's fastest growing major economy will double by 2010.
Hitachi Construction, the world's biggest maker of giant excavators, last week reported a 76 percent gain in the three months ended March 31. Building and mining booms in China and the rest of Asia drove sales.
``Japan's manufacturing sector is actually a showcase for how to implement globalization,'' said Jesper Koll, director of Tantallon Research Japan, a hedge fund. ``Whether it's Russia, the Middle East or Latin America, take your pick, Japan's on top of it.''
Japan isn't completely protected from faltering American growth. The U.S. housing crisis has activated a ``chain reaction'' that will hit Japan indirectly, according to Tetsuro Sugiura, chief economist at Mizuho Research Institute Ltd. in Tokyo.
Bernanke Warning
Gross domestic product in the U.S. grew at an annual pace of 0.6 percent in the fourth quarter. The economy could shrink in the first half of this year, and a recession is possible, Federal Reserve Chairman Ben S. Bernanke told legislators on April 2.
``First Europe and China will slow, then exports from Japan to those countries will slow,'' said Mizuho's Sugiura. ``The hit will come after a time lag.''
Whatever the external conditions, corporate Japan is in better shape than it's been at any time since the bubble burst.
The average ratio of corporate liabilities to assets has dropped to about 65 percent, the lowest level since 1955, from about 80 percent in the mid-1990s, according to Takuji Okubo, senior economist at Merrill Lynch & Co. in Tokyo.
Companies have soaked up excess production capacity. An index that measures manufacturing capacity against demand has been at or below zero for nine quarters, indicating there are few idle factories, according to the central bank's Tankan survey of business sentiment. The index stood at 31 points in March 2002 as the economy emerged from its last recession.
``People tend to blow hot or cold on Japan,'' Jessop said. ``At the moment, the pendulum has swung too far. If you're looking at developed economies, Japan is going to be one that surprises on the upside this year.''
No comments:
Post a Comment