New Dawn?

Despite the images which have dominated our television screens, it’s hard to imagine the physical fury of the earth quake which unleashed enough power to move the entire continent of Japan by 2.4 meters and surely makes the twin horrors of Hiroshima and Nagasaki pale into comparison.

Economically speaking, it’s unclear what this means; Japan has been in recession for more than a decade and the latest figures from the Bank Of Japan suggest that GDP growth was in fact at its lowest rate since 2003.

There have been a few core reasons for the recession in Japan. The first is that it’s been going through the process of deflation; the second is that, despite the high national savings rates and the strong export earnings, the country has been so politically divided it has never been able to agree long enough to unlock the power of this spending.

It’s clear that this disaster, which is Biblical in its proportions, is going to take a concerted effort for the Japanese to overcome and perhaps for the first time in 20 years the country can unite behind a single vision of growth.

To make it clear how fractured Japanese politics is – the current Prime Minister, Naikaku sōri daijin, is the fifth Prime Minister in five years and in the past 15 years Japan has gone from the largest economy in the region to number three – behind China.

The early signs are good for Japan. The Prime Minister, who was tipped to be rolled from power this month, appears secure in his job as the nation united behind a single goal of rebuilding.

The Bank Of Japan also appears, for the first time in a long time, to be getting its act together. Despite facing what is likely to be a $300 billion rebuilding and insurance bill, the Bank dropped $85 million Yen into the money market this week to keep liquidity in the banking system and ensure that the currency stayed strong.

There is little doubt that the role for Japan is changing in the World’s economy and that it faces a rebuilding task that it hasn’t seen since World War 2 when Tokyo was destroyed by Fire Storms, but there is also little doubt that it is one of the few countries with the capital reserves and the export income to rebuild.

What remains to be seen is that if this eternal threat, this single focusing thought can unite the people and the political parties long enough to allow them to focus their earnings and their savings on rebuilding their nation and finally banish the long spectre of under spending, deflation and recession.