In Japan the industrial production index plunged 9.6% MoM in December, its biggest single monthly decline since these statistics have been kept. As a result, output fell at a postwar record of 11.9% QoQ in Q4 2008. Even more shocking is that the Survey of Production Forecasts shows that a further decline of close to 20% is expected in Q1 2009. If this is realized, production will fall 30% in just six months, returning to the level of the early 1980s, before the yen strengthened dramatically. Production is falling off a cliff.

Depression in Japan?


According to the Japan Economic Dictionary (Nikkei Inc.), a depression, based upon the indexes of business conditions, occurs when both the leading and coincident CI turn sharply downward and decline in a straight line. The outlook for the coincident CI closely matches this description. From this viewpoint, it would not be far off the mark to say that the real economy is in a de facto depression.