Big recessions in Japan

 

Background information

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The world financial crisis can trace back to a  year before the bankruptcy of Lehman Brothers.

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                                 Source: muyHistoria

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Sublime Loan

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It is a type of loan offered at a rate above prime to an individual who does not qualify for prime rate loan. Quite often, subprime borrowers are turned away from traditional lenders because of their low credit ratings or other factors that suggest they have a reasonable chance of defaulting on the debt repayment.

 

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The global financial crisis in 2008 started in the United States and had a similar course than the crisis in Japan already mentioned in 1990. The so called subprime-bubble in the US bursted due to the struggle of the housing market because people were unable to pay back their loans (difference to Japan: loans were given primarily to private person than to companies) and the collapse of the Lehman Brothers security in September 2008. In contrast to the bubble-crisis in Japan, the crisis in 2007/2008 affected the whole world because the loans were given in form of bonds to investors all over the world. Hence also Japan was affected of the crisis in 2007/2008.

 

Impacts on Japan

 

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                  Source: ABDInstitute

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The graphic shows that Japan was hit hard of the global financial crisis. As you can see Japan was the only major advanced country that suffered already in 2008 a negative growth. Furthermore, in 2009 it had also the highest economy damage after Singapore and Taipei, China.

 

The dollar fell against the Yen causing a reassessment of the Yen to 87 to the dollar after the Lehman Brothers collapse.  

 

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                            Source: ABDInstitute

                         

During the first period of the financial crisis Japan did not seem negatively affected because it still had a positive growth of GDP. This however changed in the end of 2008, when the energy and other commodity prices increased sharply and the exports began to fall.

After this, Japan had to suffer the deepest fall in record of the GDP of 14.2 percent. Japan counts as a nation of exports, but during the crisis it had a dropdown of it´s export demand of cars and electronic products over 50 percent. This caused a really high trade deficit of $7.25 billion in the crisis. The drop down was caused mainly of the high value of the yen, making the japanese products more expensive.

 

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                          Source: The World Bank

 

The graphic shows the export-rate in percent of the GDP in Japan in the years 2004 to 2016.

 

 

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                                 Source: Statista

 

This graphic shows the unemployment-rate of Japan in the years of 2008 to 2018. The unemployment rate were in 2009 on a really high level of 5.08 percent for Japan.

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This video explains the connection between the Japan bubble economy from 1987 to 1990 and the global financial crisis in 2008.

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