Chapter 5: Economic Indicator

http://ctv2.theglobeandmail.com/servlet/story/RTGAM.20090216.wjapanmarkets0216/business/Business/businessBN/ctv-business

Summary:

3.3% drop in Japan’s gross domestic produce has never been witnessed by the Japanese government. Since 35 years ago, Japan has never suffered from the gross domestic rate to shrink that fast. The reasoning behind this drop according to this article is that the global demand for exports have decreased; Japan’s economy relies heavily on exports, hence the contracting GDP value. Many Japanese companies were forced to cut jobs. This affected the unemployment rates greatly, as well as the market where fewer purchases were made by consumers. This will be Japan’s third consecutive GDP drop as stated by this article; Japan is officially in a recession.

Connection:

The connection between this article and our text book is the situation of demand-deficit unemployment. This means that workers are to be laid off due to the decreasing market demand of their product. In Japan, their GDP has declined for over three consecutive quarters now – declining through two consecutive quarters means a recession is going to take place. GDP measures the total goods and service value in the market in a given period of time. In Japan, they are experiencing declination of GDP meaning the goods and services they produce are not profitable and stable due to the fewer demand. The more a product is not wanted or not demanded, it corresponds to the decrease in unemployment and a weak economy.

Reflection:

The Japanese have one of the world’s largest exporting economies. Seeing that global demand of exported goods is not as high as before, I think the Japanese economy is going to suffer greatly if they continue to rely on exportations. Instead, I strongly believe the Japanese government should give out more jobs in the infrastructure industry seeing that the Japanese have a good communication industry and that the world still has demands for these networks. With more jobs created, people will have a source of income, and it helps limit the drop of unemployment rate. Moreover, if people have money then they will continue to purchase goods; this would aid in re-stimulating the market. Therefore, slowly but surely helping the Japanese economies recover from their recession.