Japan's economy to contract amid island dispute

By Zhang Junmian
0 Comment(s)Print E-mail China.org.cn, October 12, 2012
Adjust font size:

Japan's economy may face further decline in the last quarter of 2012 as tensions continue to fester between Japan and its largest export market China amid the territorial dispute over the Diaoyu Islands, according to a study by JP Morgan released on Tuesday.

Diaoyu Islands 

The Japanese media as well have expressed their concerns about the frictions between the two countries, which may yet continue for some time to come, whereas the majority of the Japanese public simply believes that the nation's Prime Minister Yoshihiko Noda should step down.

Japan's territorial spat with China has instigated a current account slide as exports and Chinese tourism to Japan are both on the decline, U.S. magazine Business Week said last Sunday, citing the JP Morgan report. In 2011, the trade volume between the two largest economies in Asia came to a total of over US$340 billion.

The aftermath of the territorial argument with China is set to cut 0.8 percentage points off Japan's GDP growth for the fourth quarter, sending its overall economy slightly downward, rather than maintaining the original forecast of flat growth, according to JP Morgan.

JP Morgan, Morgan Stanley and BNP Paribas estimate that Japan's economy will face consecutive contractions in the last two quarters of this year. Its overall exports in August shrank by 5.8 percent compared to the same period of last year, showing negative growth for the third month running. Its exports to China and the EU are bound to plunge by 9.9 percent and 22.9 percent, respectively.

A severely-hit sector, Japan's auto sales in China have spiraled down as an increasing number of Chinese consumers shun Japanese brands amid the flaring anti-Japanese sentiment, according to the US National Broadcasting Company (NBC). In the third quarter of this year, Japan's car exports to China were estimated to crash by a massive 70 percent, while exports of car parts might drop 35 percent. Mazda and Mitsubishi reported that sales in China for September tumbled down by 35 percent and 63 percent, respectively, compared to the same period last year. Toyota said its August deliveries in China had slipped down an astonishing 50 percent.

AFP also reported that amid the increasingly tense relations between both countries, Japan's three largest automakers-Nissan, Tokyo and Honda- were planning to temporarily cut production to half of their normal levels in China after the country's Golden Week holiday had ended. The three brands will respectively reduce their output by 30,000 to 40,000 vehicles within one month, should the plan not be cancelled.

Japan's tourism, which has been relying on China for its development over recent years, has also received a heavy blow due to the sharp decline of Chinese tourists going there, according to Tokyo Shinbun on October 8. The Financial Times reported that every Chinese tourist spent on average US$225 in Japan between April and June. It is in fact the large number of Chinese tourists that helped Japan's tourism recover from the aftermath of the 2011 tsunami and nuclear crisis. The number of Chinese tourists exceeded 200,000 in July, a historical record high. However, many Chinese have canceled their plans to visit Japan ever since it revealed its plan to nationalize the Diaoyu Islands in September. 4,300 orders to Okinawa were called off within six weeks after Japan had made this so-called island purchase, and there have been very few new Chinese bookings since.

Japanese senior investment officer Shigeo Sugawara explained that no one had anticipated that the impact the disputes would have on both nations' economic and trade ties would be this acute and dramatic, according to Wall Street Journal on October 5. The paper quoted Sugawara by writing that "This is becoming more than a mere political problem. You can no longer ignore the economic effects of the issue."

Japan's Nikkei news also showed its concerns over the escalated tensions between the two countries, saying that the pressure of the territorial dispute may come to pose a huge threat to the currently slowing-down global economy. If the tensions between the second and the third largest economies in the world continue to linger on for a long period of time, they may lead to yet another global economic crisis- after the US subordinated debt crisis and the Eurozone debt crisis.

Japanese broadcaster TBS released the results of a survey conducted between October 6 and October 7, showing that only 29 percent of the respondents believe Noda should see his term in office through.


Print E-mail Bookmark and Share

Go to Forum >>0 Comment(s)

No comments.

Add your comments...

  • User Name Required
  • Your Comment
  • Enter the words you see:    
    Racist, abusive and off-topic comments may be removed by the moderator.
Send your storiesGet more from China.org.cnMobileRSSNewsletter