Japan - Down but not out (Feb 09)

The speed and extent of the collapse in Japanese exports should at least mean that the immediate adjustment to weaker global demand has now largely run its course. The fall-out in terms of the damage to confidence, additional production cuts, growing spare capacity and a weaker labour market will linger rather longer. Nonetheless, the Japanese economy has already taken a very large hit from the world recession and there should not be much more bad news to come. The upshot is that Japan is a prime candidate for a “V”-shaped recovery, with a return to growth (on a quarterly basis) as early as the second quarter.