It is official: Japan has followed Germany into recession, as defined by two quarters of negative growth. China’s rate of expansion also looks set to slow more than previously expected. What do these countries have in common? All rely on exports to keep their economies going, while their own consumers are reluctant to spend.
But avoiding the sort of profligate spending of the US and UK has not saved Japan, Germany and China from credit bust fallout. Finding buyers for their exports is proving hard in a global economic downturn. To strengthen their economies, policymakers have to encourage their people to go shopping.
Shifting away from exports would not only address imbalances within these countries. Global imbalances, where countries with current account surpluses such as Japan, Germany and China helped finance the credit boom of deficit countries, could also at last be addressed.