2007-08-14

Japan's growth slows

Not good news:
Japan's economy grew by just 0.1% from April to June, increasing speculation that the central bank will delay an interest rate rise until September.

The Bank of Japan had been expected to raise rates from 0.5% to 0.75% this month, but analysts said the weak data would probably delay the move.
This is not good news. Japan's economy depends upon exports and any weakness in world consumption (especially the US) will result in lower growth for Japan.

Considering the trade imbalances already inherent between Japan and the US, it stands to reason that a better solution would be a rise in the Yen to allow Japanese domestic spending to grow, drawing in goods and services from outside, including the US.

2 comments:

Dave Lankshear said...

I'm still confused by the notion that economic growth can ever be a good thing. We've filled the planet, and our current lifestyle which over-uses the earth's ecosystem services by a factor of 3 must change... I just can't see how constant exponential economic growth is possible.

One Salient Oversight said...

I agree that there are limits to growth. In the current scheme of things there is still room to grow, though.

When we can get our act together and start having sustainable economic activity, then we can start worrying about economic stability (zero-growth economics).

Let's say it is determined that the best level of sustainable economic activity is E (E = $ per capita). If an economy has a GDP per capita below E then it means it can grow. If it is above E then it must shrink.