Japan remained in mild recession through Q4

16 Feb 2013 by Jim Fickett.

In my view there are three main things to watch on the health of the US recovery. First is employment; as mentioned many times, the growth rate of jobs has stalled and may be decreasing. If it falls below the neutral rate of 1%, unemployment will begin to rise again, and that could stall the recovery.

The second is the credit cycle. Bond yields, particularly junk bond yields, might have bottomed. If the credit cycle begins to turn, that could well tip the country into recession.

The third is the health of our main trading partners. It is very hard to know what is really going in within China. Where there is more transparency, in Japan and Europe, economies are not in great shape. That creates a drag on the US.

Japan's economy shrank from Q1 to Q2 last year, from Q2 to Q3, and from Q3 to Q4. However two of those quarterly changes were approximately zero, and before the recession started there was one quarter of strong growth. The net effect is that, while Japan is clearly in recession currently, the year-over-year change in real GDP remains positive, so the recession must be characterized as quite mild.

(See the Reference page Japan GDP for background, sources, and previous commentary.)