FT Ponders Possible Japanese Slowdown

[Mulboyne]

FT: Tokyo's bustle at odds with fragile outlook
On any given weekend, the shops in Tokyo's newest retail complexes are bursting with young men and women searching for the latest trendy accessory or queuing for a taste of gourmet chocolates flown in from Paris. But any evidence of a booming economy belies creeping signs elsewhere in Japan that things are not as hunky-dory as Tokyo's gleaming new buildings might suggest. Outside Tokyo, the streets of many regional towns are filled with shuttered shops instead of bustling crowds. Housing starts have collapsed, because of tighter standards that were hastily implemented, while sales of trust funds have plunged as the result of new legislation. Wages have meanwhile remained subdued and consumer confidence has dropped sharply this year...So, after five years of growth, is Japan's economy slowly grinding to a halt? Recent trends are giving some economists grounds for concern. "The Japanese economic recovery remains somewhat fragile," writes Tetsufumi Yamakawa, chief economist at Goldman Sachs. "The probability of a recession occurring within the next six months...has not reached the danger level of 60-70 per cent, but it is gradually rising, reaching 40.5 per cent in September"...Others are more sanguine. "Industrial production figures are still looking pretty good and a lot of the fall in wages has to do with [the one-time impact of the] retirement of the baby-boomers," says Robert Feldman, chief economist at Morgan Stanley in Tokyo...more...

[Mulboyne]

Bloomberg: Goldman Says Japan Recession Risk at `Danger Level'

Goldman Sachs Group said there's a 50 percent chance Japan will slip into recession and cut its 2008 growth estimate for the world's second-largest economy. "We estimate the probability of a recession in Japan has risen to the 'danger level,'" Tetsufumi Yamakawa, chief Japan economist at Goldman, said in a report to clients today. "We project weaker-than-expected growth in Japan especially in the first half of 2008 owing to an inevitable, moderate slowdown among emerging economies"... The cycle of rising corporate profits feeding into wages and consumer spending is losing momentum, Muto said today. "The greatest challenge for the Japanese economy, needless to say, is a recovery in personal consumption, which has remained in an extended slump," Goldman's Yamakawa said. "Innumerable obstacles stand in the way." Falling wages, which have dropped about 10 percent in the last decade, and rising food and energy prices have sent consumer confidence to a near four-year low. Paychecks are unlikely to rise this year as rising oil prices crimp profits. With domestic consumption flat, the economy is more dependent on foreign demand. Exports contributed almost of Japan's growth in the third quarter, as demand from Asia helped make up for slowing orders from the U.S The risk is that demand from Asia will also dry up...more...