Japanese households and companies have avoided the financial excesses and over-indebtedness that point to a severe and prolonged recession in the West. Japanese banks are also in relatively good shape. We therefore continue to expect Japan to be among the first of the major economies to recover from the global recession – eventually. But in the meantime there is still a big hit to come from collapsing exports. We now forecast that Japanese GDP will fall by around 0.8% next year (previously -0.2%), before rising by 1.0% in 2010.
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