JAPANESE ECONOMY-2008 (part-2)

Goldman Sachs, a leading private player in Japanese Market has announced its prediction that Japanese economy is on the threshold of a most likely recession with the probability of 50% for next year and so, with the background of Nikkei coming down to its all time lowest mark, resulting in the lessening of capital investment in Japanese market by global investors. Eventually, Goldman has showed a remarkable cut in its economic growth up to 1% to 1.2% by the fiscal year of 2007-08 in world second largest economy.
Mr. Tetsufumi Yamakawa, the chief economist of Goldman Sachs, has projected his grief over possible economic recession in Japanese economy which he said that the possibilities has crossed the danger mark and we project our economic growth reduced by 1% in the coming year, thanks to moderate, sluggish slowdown in the world emerging economies. He also emphasized that the Bank Of Japan has to forgo any hike in the interest rate for next year and so to maintain the domestic demand sustainable. As we all know very clearly that Japanese economy has been benefited from its overseas exports mostly to the Asian countries and US where probable recession threats has given a serious blow to US domestic demand which would have its shock waves to other Asian countries too and Japan is not an exception in it.Japan will be the most affected economy in that case since Japan is the country which makes half of its exports to these countries.
Cooling US domestic demand, continuous raising oil prices, selling of property holdings in Japan by US as well as global investors has threatened Japanese policy-makers in a long way, as Nikkei has showed a all time low mark in the market stock exchange owing to the reduction in the capital inflow to the market and investment by the global investors, stocks including the evergreen stocks of Mitsubishi Estate has fallen down following the announcement of subprime crisis in US which is prompting global investors to sell off their property holding in Japan.
Mr. Ttoshiro Muto, deputy governor of Bank Of Japan, has said in his report that the future prediction of Japanese Economy for one year is slow and sluggish owing mainly to the stagflation in US economy. He also projected his belief that the possible slow down in Japanese economy has prompted foreign investors to reduce their investment in Japan which eventually proved to be burden on the domestic investors and is likely to be compensated by the corporate profit. These possible inclination has bring down the possibility of any wage-hike in Japan for the last 10 years as compared to global average wage-hike because the overall momentum of feeding the wage-hike and consumer spending by the corporate profit has lost its magnitude which leaves only one alternatives for us which is to increase the tax. This is the reason why Japanese government is trying its most to have an increment in consumption tax.
The deadly trio of three reasons, including raise in the oil prices, slowdown in demand and possible economic recession in US, rising food prices has given a deadly thrust to any wage-hike in Japan which has lead the Japanese Consumer Confidence Index(CPI) to its minimum level in past 5 years. Salaries are not going to witness any increment this year as raising crude petroleum prices has crimped the corporate profits which will be most likely resulting in the thrust to already flattened domestic demand and increasing dependence to the foreign demand and investment.
"A US slowdown affects Asia, beginning with China, and via that route it affects Japan," the Economics Minister, Hiroko Ota, said this week.

PRABHAKAR