Current economic Condition of Japan

Present economic condition of Japan

Early 2011, Japan was hit by a catastrophic earthquake that led to its output contraction by 0.5 percent, slow import growth at 1.9 percent and GDP reduced by 0.5 Percent at the end of the year (“Trade growth to slow,” wto.org). As the nation tried to recover from the natural disaster, Thailand’s flooding hindered the structure of supply chain, considering that Thailand is a key supplier of manufactured inputs. Japan economy is currently at the state of reconstruction where the government is taking enough measures in controlling public spending to generally support economic pick- up growth in by the end of the year. According to the OECD, “The government plans to spend a total of around 19 trillion Yen (about 4% of GDP) over five years for reconstruction…..Three packages and the FY 2012 budget containing a total of around 18 trillion Yen of reconstruction spending have been approved” (71).

Employment is expected to change positively from 2011perfomance as individual and businesses stretch out for recovery. The government however, has to plan for budget deficit that would follow in the process of slicing other ministries for reconstruction purposes. The deficit is projected to rise to 10 percent this year and the next, which will consequently push the economy to a gross public debt of over 220 percent of GDP risking its stability (OECD 72). Financial institutions amongst the Bank of Japan have been working close with the government in Japan’s economy recovery. The policy interest rates have been reviewed and the bank has kept it almost at zero value and at the same time announcing its aim as one percent annual change in CPI to stabilize price and as a way to end deflation.

The affected relation between China and Japan after the territorial dispute over Senkaku islands has impacted negatively on Japans auto market, which may lead to the industry not achieving its target by the end of the year.

OECD. OECD Economic Outlook Vol.2012/1. Paris: OECD Publishing, 2012. ilibrary. Web. 4 October, 2012.