Japan at first appeared relatively unscathed from the global financial crisis. But now it may seem that Japan may be the worst hit of Asian Economies. The second largest economy in the world after the United States, is deteriorating at its fastest pace since the first oil crisis of the 1970s, hurt by rapidly shrinking exports and anemic spending at home in the global financial crisis.

Companies like Toyota Motor and Sony have had to fire workers to stem the burgeoning losses. This has only driven the Japanese unemployment rate up to 4.4 percent in December.

Economists observe that this drastic slump is due to the vulnerability of the export-driven economy model of the country. Hideo Kumano, chief economist for the Tokyo-based Dai-Ichi Life Research Institute says. “This shows how feeble Japan’s economic fundamentals were in the first place. It’s as if an already sick patient has caught influenza,” referring to the fact that consumer spending in Japan had been weak before the effects of the financial crisis took hold.

Prime Minister Taro Aso, whose popularity ratings have plummeted even as an election approaches this year, has promised stimulus spending worth almost ¥50 trillion in two packages unveiled late last year. But political bickering in a deeply divided Parliament slowed progress on the plans.

It means more bad news and that “Japan’s current downturn will continue until sometime after the global economy begins to recover.”

Via : International Herald Tribune