Five months post-disaster: Hopeful signs of Japan bouncing back
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STEVE CHIOTAKIS: Today, a bit of good news out Japan, a country ravaged this year by natural disasters and an economy struggling to bounce back. More than 5 months after the devastating earthquake and tsunami there the country reported today manufacturers are recovering strongly. The BBC’s Roland Buerk is with us now from Tokyo with that story. Hi Roland.
ROLAND BUERK: Hi.
CHIOTAKIS: So tell me about this data and what it says about Japan’s economy.
BUERK: The biggest thing about Japan’s economy — confirmation that the country is in recession for the third straight quarter, caused shares in Japan to jump in price this morning. That’s because although the economy has contracted between April and June, by 0.3 percent, that was much better than analysts and economists had been predicting. One of the reasons why, is manufacturing has recovered more strongly, more quickly than expected after the earthquake and tsunami back in March. Another big reason why is the Japanese seem to be getting over their move of self-restraint. Their kind of shock after the earthquake and tsunami made so many people shun the shops — that seems now to be wearing off and people beginning to consume again.
CHIOTAKIS: How did they get there so fast, though Roland? I mean, you understand that the economy is going to recover or try and bounce back, anyway, but this is just months after this earthquake.
BUERK: Well, it is pretty extraordinary. For manufacturing and things like the auto industry to get back to normal. One of the reasons why, perhaps, is they’re pretty unique brand of cooperative capitalism that you have here in Japan. That means that for companies that were effected, those key components suppliers and the supply chain that was holding everything up — at their parent companies and some cases their competitors, and also their customers, as well, sent staff along to help. And that is one of the reasons why those logjams were cleared so quickly.
CHIOTAKIS: Does a recovering Japan, Roland, help the global economy? And maybe help the U.S. avoid a double dip recession?
BUERK: It certainly helps in the sense that this is still the third-biggest economy in the world. But I think the effect is more likely to be the other way. Because what is really hindering Japan is the weakness of the U.S. dollar — the strength of the Japanese yen. The real fear is that this recovery after the earthquake and tsunami could be choked off by that. At the moment, the yen has been approaching its highs against the dollar. Record highs since the end of the Second World War. And that really hurts Japanese companies. It means that their products — things like TVs that they sell in the United States are just less competitive. And the profits they make in the United States are worth less when they bring them back to Japan. And in the long-term, the risk is that if the yen stays high, Japanese companies will start to move more of their production abroad, hollowing out the economy here.
CHIOTAKIS: Does that really worry Japanese economists?
BUERK: It worries economists, it worries the government as well, because they know just how important this is for Japan. This is a country that’s relied on exports for growth. So, anything that could damage that, damages Japan in the long-term.
CHIOTAKIS: The BBC’s Roland Buerk in Tokyo. Roland, thank you.
BUERK: Thank you very much.
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