Japan suffers worst economic plunge in 40 years

"Japan's economy saw the steepest decline on record in its second quarter -- as the global health crisis took a big bite out of consumption and exports.

"It's putting the country's policymakers under pressure to take bolder action and prevent an even deeper recession.

"Japan is the world's third-largest economy behind the U.S. and China, and it shrank by nearly 28 percent from April to June... the biggest contraction in four decades.

"And it's wiped out all the gains from Prime Minister Shinzo Abe's "Abenomics" stimulus policies that began back in 2012.

Japan has already deployed massive stimulus policies to cushion the blow from the health crisis, which hurt an economy already reeling from a sales tax hike last year - and the U.S.-China trade war."

(cont.)

It's an extraordinary decline, to restate the obvious. It seems people are still thinking the rebound will be equally extraordinary, which is why the markets haven't tanked. Smells a bit like irrational exuberance to me. Meanwhile alternative investments like gold and bitcoin are riding a wave of latent unease about the equity markets. I would have expected some weakness in the yen, but so far the yen is strong as ever.

Majestic said:

It's an extraordinary decline, to restate the obvious. It seems people are still thinking the rebound will be equally extraordinary, which is why the markets haven't tanked. Smells a bit like irrational exuberance to me. Meanwhile alternative investments like gold and bitcoin are riding a wave of latent unease about the equity markets. I would have expected some weakness in the yen, but so far the yen is strong as ever.

Click to expand...

The figure is not so different from many other economies - in Britain the yearly decrease compounded from the 3 month decrease was over 40%! - which may explain why the yen hasn't shown weakness. What I found stranger is that stock markets have reached their pre-corona levels despite the world economy being in a much less healthy state than before the virus.

Majestic said:

It's an extraordinary decline, to restate the obvious. It seems people are still thinking the rebound will be equally extraordinary, which is why the markets haven't tanked. Smells a bit like irrational exuberance to me. Meanwhile alternative investments like gold and bitcoin are riding a wave of latent unease about the equity markets. I would have expected some weakness in the yen, but so far the yen is strong as ever.

Click to expand...

As long as weekly updates about a possible vaccine appear, the economy will not go over the edge. Consumer behaviour is all about outlook. As long as you expect the situation to become normal next year, you will feel relatively secure and will keep spending your money (and your company will keep having customers). Now, if they would say today that we have to brace ourselves for at least five years to wait until this virus develops into something harmless (and a vaccin won't come) then the economy will sink to historical lows. Compare it to the last economic crisis: even the people who kept their jobs and were largely unaffected, they adjusted their spending pattern because " you never know what the situation will look like next year", and then immediately spent their saved up spending money when the economy showed signs of improvement.

Majestic said:

I would have expected some weakness in the yen, but so far the yen is strong as ever.

Click to expand...

I am also curious as to how the yen will do during the next 12 months. Is all of this having an effect on bitcoin?

Buntaro said:

I am also curious as to how the yen will do during the next 12 months. Is all of this having an effect on bitcoin?

Click to expand...

But since all countries are harmed, would it not remain stable since other currencies have a hard time as well?

Btw, in the past ten to twelve years I have seen the yen as high as 95 and as low as 160 compared to the Euro, so I reckon the current 125 is average? Neither high nor low.

cocoichi said:

Consumer behaviour is all about outlook.

Click to expand...

There is unprecedented destruction of certain businesses going on right now which is not related to consumer sentiment. To give one example, the airline industry is in dire straits because no one is flying. Since no one is flying, the jet fuel industry, airports, all the services associated with the airports, hotels, travel agencies, etc... are all suffering. This is not related to sentiment or the hope for a vaccine. The restaurant/hospitality industry is suffering greatly. Everyone who makes their living off of serving, cooking, or supplying restaurants is taking a massive hit. I don't know how or when the global economy pulls out of its tailspin, but I think consumer sentiment is a bad metric to rely on during this crisis.

Gold and bitcoin doing extremely well right now. Then again, so is the NASDAQ, for reasons that escape me.