Can China lift Japan out of recession?
Author: Brian P. Klein, International Affairs Fellow in Japan, Council on Foreign Relations
Hopes are high and rising that a near-term China recovery, fueled by an estimated $587 billion stimulus plan and massive bank lending, will be a boon to Japan’s ailing export sector. This new demand is expected to lift China out of recession even before the United States and Europe recover.
China’s stimulus, however, is neither large enough nor necessarily supportive enough of foreign imports to have a significant short-term impact on Japan’s rapidly deteriorating economy.
Domestically, two previous Japanese stimulus plans have failed to stem the downward trend. In response and as elections approach, Prime Minister Taro Aso has proposed a $157 billion third tranche. Details are still emerging, but a mix of direct short-term economic aid to workers, incentives for green technology, and rebuilding some of the ailing healthcare system are being proposed.