Japan’s economic disaster: addressing some misperceptions
Author: Ed Lincoln, Leonard N. Stern School of Business, New York University
Japan is currently facing the worst economic downturn since 1945.
Although this is a statement that is factually correct, it is also somewhat misleading. In the fourth quarter of 2008, the economy shrank at a stunning 12.1 per cent quarter-on-quarter annualized rate (that is, the amount by which the economy would shrink if the drop in GDP from the third quarter to the fourth quarter were to continue at the same pace for three more quarters).
The economy will certainly not continue to shrink at that rate, but economic forecasts for the calendar year 2009 are in the range of a decline in real GDP between 5 and 7 per cent. In terms of economic growth, this would clearly be the worst performance since 1945, and is larger than the expected decline in the United States.