Japan's gross domestic product in real terms in the January-March 2009 period declined 4 percent from the previous quarter for an annualized contraction of 15.2 percent, a postwar record, following a revised annualized 14.4 percent drop in the October-December 2008 period. The drop in GDP shows that the Japanese economy is rapidly deteriorating in the midst of the global recession. Both the government and private sectors need to do their utmost to stem the decline.
The steep drop in GDP was caused by a sharp decline in exports and sluggish capital investment and consumer spending. It underlines the vulnerability of the Japanese economy, which relies heavily on exports. The annualized 15.2 percent contraction of GDP is much worse than the 6.1 percent contraction in the United States and the roughly 10-percent contraction in the 16 euro-zone nations. In the January-March period, Japan's exports fell 26 percent from the previous quarter, a postwar record; capital investment dropped 10.4 percent — also a postwar record — and consumer spending decreased 1.1 percent.
Dismissal of workers is continuing. The unemployment rate in March stood at 4.8 percent, a rise of 0.4 percentage point from February. There is a view in the labor ministry that the rate could top 6 percent, breaking the worst record of 5.5 percent. As the unemployment situation worsens, consumer spending will fall even further, inflicting further harm on the already reeling economy. The government and enterprises must do their best to retain workers and increase job opportunities. Some data suggest the economy may start picking up in the near future. A government survey in April shows that the consumer mind index rose 3.5 points from March, marking an increase for four consecutive months. A preliminary report shows that the industrial and mining production index in March rose 1.6 percent from the previous month, the first increase in six month. To ensure such seeds of recovery take firm root, the government must continue to push measures to increase domestic demand and lay the foundations of future growth sectors.