Most Japanese companies attempting to expand their market beyond their homeland are doing so to increase their profits. However, a piece on Reuters this morning says these expansion could be whats driving Japan’s economy straight into a recession.
While the US economy actually showed a slight pick up in the last quarter, Japan’s economy showed a .9 percent decrease in GDP. The Senior Economist at Mitsubishi, another globalized Japanese company explains that their data proves that Japan has now fallen into a recession.
The decline for Japanese exports composes the majority of the decline of imports. Though Japan has been very successful in being a major global player in electronics, with companies such as Sony and Panasonic becoming household names, other electronic companies are also riding the globalization train at full speed. Japan now has to rivals such as Apple Inc. from the US and Samsung from South Korea
Companies such as Panasconic Corp and Sony Corp, two major Japanese electronic suppliers in the global market are cutting costs and spending at home in order to be able to compete in the global market. They are planning almost an addition 30% in cuts in the upcoming year.
By expanding dependence to foreign markets for profits, Japan may have walked themselves straight into a trap. Though a larger market means more potential customers, is also means carrying more risk.
Signs point to Japans territorial conflict with China to be playing a large role in Japan’s economic decline. Their continuing feud with its neighbor has cut Japanese exports, and more importantly, the Chinese demand for imports due to boycotts. Japanese companies such as Nissan Motor Co. depend so heavily on Chinese buyers that a sudden boycott puts a major blow on their profits and the Japanese economy as a whole.
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