Asian economic powerhouse Japan reported that its exports plunged a record 35 per cent in December, the third consecutive month, amid global recession that is forcing consumers in the US, China and Europe to tighten their belts, which in turn would further push Japan into a deeper recession.
Japan being an export-dependent economy, has shown how vulnerable it is to global economic slowdowns as Japanese companies will be forced to cut more jobs, shut plants and cut costs in order to survive the global financial crisis.
The world's second largest economy saw its exports drop for the third straight month in December, plunging 35 per cent from a year earlier, which is the biggest decline seen since 1980, and broke the previous month's record decline of 26.7 per cent.
For 2008, Japan's surplus declined for the first time in two years. Exports for the year fell 3.4 per cent, led by a 15.8 per cent decrease to the US and a 7.8 per cent drop to Europe.
Japan's imports in December last year declined for the second consecutive month to 5.1539 trillion yen, down 21.5 per cent from a year earlier, due to falling oil import prices.
Since the decline in exports surpassed that of imports, the trade balance fell into the red to 320.7 billion yen.
Vehicle exports to the US plunged by more than 50 per cent, while that of auto parts declined 41.8 per cent and audio equipment fell 60.9 per cent.
Exports to Europe tumbled by 41.8 per cent, with vehicle shipment plunging by 63.4 per cent and semiconductor shipments to Asia fell by 40 per cent.
With consumer spending being choked from every continent and recession biting very hard in the US, Europe and certain parts of Asia, especially Japan, Prime Minister Taro Aso has called the recession ''once in a 100 year crisis.''
Toyota and Honda, the two stalwarts of Japanese manufacturing, decided this month to cut down on production to combat a dramatic slump in car sales. Honda has announced it will cut 3,100 jobs in Japan and reduce domestic production by 56,000 vehicles. These decisions follow smaller rival Nissan's declaration yesterday of cutting domestic production. (See: Japanese auto makers cut back on production, reduce workforce)
The Subaru maker, Fuji Heavy, meanwhile, became the latest auto company to forecast losses for its current financial year as a spreading global recession dampened demand in mature markets and hindered sales in emerging countries. The economic troubles are also affecting motorcycle demand, and Yamaha Motor said that it would halt production at 11 plants for as long as 10 days.
Toyota had previously said it would halt production at its Japanese plants for 11 days in February and March, may cut all 4,500 temporary workers because of low demand and warned that a rising yen against the US currency will make it report its first annual loss in 70 years.
Honda said last week it may axe 3,100 temporary workers by the end of April and will be forced to shift more of its production overseas if the yen strengthens further.
Sony Corp, the Japanese electronics giant is expected to post its first operating loss of $2.9 billion this year, its first annual loss in 14 years as the global recession coupled with a strong yen force it to revise its forecasts downwards. (See: Sony braces up for recession; cuts jobs, closes factories)
Sony plans to slash 16000 jobs worldwide and close factories, cut investment as the recession in Europe, Japan and US forces consumers to cut spending. Sales of many electronic goods like flat-panel televisions, cameras and mobile phones are forecast to fall this year, according to studies conducted by a leading Tokyo based institute.
The Bank of Japan cut its growth forecasts on Thursday, as it feels that the country's economy would contract for two full years through March 2010.
To ease the tight money market, the central bank said it would buy corporate bonds and warned deflation was returning for the second time this decade.
With Japan sliding further into recession and the banking sector in bad shape, economists feel that the economy will require yet another intervention from the government but may scare away investors to the safer grounds such as the US treasuries.