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Japan Defence and Security Report Q2 2009
Market |
Defence |
Report Type |
Market Research |
Country |
Japan |
Published |
26 May 2009 |
Number of Pages |
53 |
Download |
|
Immediate |
|
Publisher |
Business Monitor International |
Japan will bear much of the cost of relocating 8,000 US Marines
Recent news has been dominated by three themes. One is the agreement whereby Japan will bear much of the cost of relocating 8,000 US Marines – and their families – from Okinawa to Guam by 2014. The relevant pact was signed by Japan’s Foreign Minister and US Secretary of State Hillary Clinton during her visit to Tokyo in February – and paves the way for the Japanese government’s payment of US$2.8bn (or somewhat less than half of the total cost that it must bear for the relocation) in the near term.
The second theme is greater Japanese participation in international missions. Over the last three months, the government has extended the navy’s involvement with refuelling of (foreign) warships that are in the Indian Ocean as a result of the US-led campaign against terrorists in and around Afghanistan. The government has also committed to continuing its programme of assistance to the government of East Timor, under the aegis of the UN Integrated Mission in East Timor.
The third theme is the hawkish stance taken by the government in relation to tests of North Korea’s Taepodong-2 strategic missile. Official announcements suggest that the missile will be shot down if it flies over Japanese territory.
Meanwhile, neither the political nor the economic situation is germane. An unfolding donation scandal is hurting the prospects of a decisive victory by the main opposition Democratic Party of Japan (DPJ), and could yet prompt DPJ leader Ichiro Ozawa to resign. However, with opinion polls indicating historically low popularity for Prime Minister Taro Aso, we feel it is unlikely that the ruling Liberal Democratic Party (LDP) can stage a comeback.
BMI has revised down its 2009 real GDP growth forecast for Japan to -4.9% from -3.1% previously following the release of Q408 preliminary GDP data on February 16. The estimates from the Cabinet Office showed that real GDP shrank at an annualised rate of 12.7% (3.3% quarter-on-quarter—q-o-q) in Q408, which was the worst contraction since the oil shock in 1974. Q408 was the third consecutive quarter of contraction, taking full-year 2008 growth to -0.7% – the first negative yearly performance since 1999. Japan's performance in Q408 also stacks up poorly against the US, which shrank at an annualised rate of 3.8%.
Unsurprisingly, the single largest factor dragging down GDP growth was net exports. Exports shrank by 13.9% q-o-q in Q408, while imports rose by 2.9% over the same period. Overall, the fall in net exports contributed a whopping 3.0 percentage points (pps) to the 3.3% q-o-q GDP contraction. Japanese exporters have been hard-hit by the strong yen and the slump in global demand.
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