Japan's stimulus clarity needed

Japan officially acknowledged that the country is in a recession; its first since 2001. The decline in gross domestic product from July-September was the second consecutive quarter of negative growth -- meeting the definition of recession.

With an export-reliant economy, the corporate earnings projections aren't very rosy. The dependence on outside demand puts a spot light on Japan's need to stimulate its domestic economy.

Japan learned a great deal of lessons from the 90s and corporations have made tremendous improvements to their balance sheets. The Daily Yomiuri reported that the impact of 2007 troublesome domestic issues were acknowledged. Jesper Koll, CEO of hedge fund Tantallon Research Japan said "the domestic economy began faltering in the summer of 2007 under higher taxes and a credit crunch in the consumer finance industry. Regulatory debacles, including a massive pension scandal and confusion over new construction regulations, added to the worsening conditions."

Japan's recession is projected to continue for a few more quarters, but not to the same level as the U.S. or Europe. If the government can inject more cash and clarity into their domestic stimulus, Japan should be able to pull ahead of their peers. But to increase domestic demand, the government needs to put cash in the hands of all its citizens and provide the leadership to empower them to spend.


Sources:
http://hosted.ap.org/dynamic/stories/A/AS_JAPAN_MARKETS_ASOL-?SITE=YOMIURI&SECTION=HOSTED_ASIA&TEMPLATE=ap_national.html

http://hosted.ap.org/dynamic/stories/A/AS_JAPAN_ECONOMY_ASOL-?SITE=YOMIURI&SECTION=HOSTED_ASIA&TEMPLATE=ap_national.html

Note: the yen closed Friday at 97.20 yen to the dollar.