How Steep Is The Japan Slowdown?

- "Japan’s economic performance was generally stronger than most analysts anticipated in the first quarter of 2010 as strong regional growth helped produce a robust export driven expansion, but growth slowed markedly in the second quarter, raising concerns about a double-dip recession. The second half of 2010 and 2011 looks to be an increasingly challenging time for the country’s economy and for the country’s policymakers. A GDP growth slowdown in China and the United States will combine with a stronger yen to temper the advance of Japan’s exports and production. At the same time, fiscal stimulus pumped into the economy in 2009 and 2010 that helped to bolster Japanese consumer spending will swiftly fade from view over the forecast horizon. This sets one of the world’s largest economies up for a stark deterioration in growth in 2011 at a time when the Japanese economy is still struggling with deflationary forces. The policy response in Japan is increasingly important, but also increasingly difficult given the high government debt levels and seemingly unending need for additional monetary and fiscal pump priming."

Wells Fargo Special Commentary 20100901