The first-quarter economic results for Japan were grim, revealing an annualized rate of contraction of -3.7% over the first three months. Note that the earthquake struck on March 11, so there really are only a couple of weeks of “earthquake impact” in that number.
The next quarter’s numbers will be even grimmer (that’s a prediction), and this will catapult the Japanese deficit and sovereign-debt readings into brand-new territory.
Japan back in recession as earthquake cuts consumption
19 May 2011
Japan’s economy, the world’s third largest, has slid back into recession after the devastation caused by the earthquake and tsunami in March.
Gross domestic product shrank 0.9% in the first three months of the year, the Cabinet office said, giving an annualised rate of contraction of 3.7%.
Analysts say consumption and exports were worst hit.
Japan’s economy has now contracted for two quarters in a row, the generally accepted definition of a recession.
Exports were hit for obvious reasons. Between the quake damage itself, workers attending to more immediate needs, and radiation contamination worries, exports took a hit. That was expected. However, imports are part of the story too. In the GDP equation, imports are subtracted from exports, and so any rise in imports translates into a reduction in GDP. Japan’s imports of non-nuclear fuels is now set to surge, and that alone is a big reason why I am bearish on Japanese growth (or lack thereof) for the next couple of quarters.
Japan, unfortunately, is now a Petri dish for what happens to an industrialized economy when it is starved of the energy it desires and requires. Secondarily, it will also be a proving ground for what happens when loose monetary policy and grotesque deficits try to overcome what we might call ‘reality.’
First and foremost, before you can do anything else economically, you have to have energy. And of the forms of energy, electricity is the most important and essential of them all. It is electricity that is missing in the Japanese equation.
by link54 
