Japan Economic Crisis: Land of the Rising Sun Slips into Recession
Tokyo has reported its second consecutive quarter of negative GDP growth, meeting the technical definition of an economic recession. Undoubtedly, the recent earthquake, tsunami and nuclear disaster exacerbated Japan’s already weak economic performance. Nonetheless, the trends were already bleak, but clearly are weaker in the wake of the recent disasters.
In the first quarter of 2011, the Japanese economy contracted at an annual rate of 3.7 percent. The return to recession in the world’s third largest economy will undoubtedly have negative repercussions on the trajectory of the overall global economic crisis. Furthermore, Japan already has the largest ratio of public debt to GDP of any advanced economy. The borrowing requirements of Tokyo are being further expanded due to the cost of reconstruction stemming form the earthquake and tsunami. A weakened economy coinciding with a worsening public debt crisis does not portend towards a positive overall outlook for the Japanese economy.