MarketWatch reports about Industrial production in Japan falling off a cliff:
Japan November industrial output falls 'off the cliff'
By V. Phani Kumar, MarketWatch
Last update: 4:06 a.m. EST Dec. 26, 2008
HONG KONG (MarketWatch) -- Japan's industrial output tumbled at a record pace in November, stoking fears the country's recession may stretch longer and be more painful than anticipated.
Industrial production fell as much as 8.1% in November from the previous month -- the biggest drop in the measure since the government started releasing comparable figures in 1953 -- as Japanese companies produced less automobiles and other machinery on vanishing demand.
The drop was steeper than the 6.8% fall expected by economists, and came after a 3.1% decline in October.
"Industrial production in Japan is falling off the cliff," wrote Merrill Lynch Economist Takuji Okubo in a note, adding that the decline was also greater than manufacturers planned as of October.
"Adding to this massive cut in November is manufacturers' plan to cut even further in the next two months. They now plan to cut their production by 8% in December and by 2.1% in January," Okubo added, referring to the result of a survey published by the Japanese Ministry of Economy, Trade and Industry.
The survey findings showed that transport equipment, including cars and trucks, ranked among the top three contributors to the decline from November through January, suggesting the impact of weak automobile sales in the U.S. and elsewhere was severely hurting Japanese carmakers.
"With these cuts, the transportation machinery makers will have cut their production by almost 40% between October and January. 40% cut in 4 months," Okubo wrote. "Going forward: the path of industrial production depends on whether policy actions succeed in stimulating demand in early 2009."
My reaction: Japan, like the US, has an industrial sector dependent on making big ticket durable goods (ie: cars) and capital goods, which tend to get killed in economic downturns. Since this is the most global slowdown since the great depression, demand for goods from "developed" nations like Japan and the US is plummeting much faster than demands for imports. As a result, trade deficits are exploding even in countries like Japan (see japan trade deficit explodes).
Another key point: we don't know the November numbers yet for the US, but they will be even worse than Japan.
Everyone be warned: we have a situation where trade deficits in most "developed" nations are going to worsen while the willingness of emerging markets to finance those deficits is disappearing. Get your money out of the currencies of all "post-industrial" nations (those like the US which don't produce anything), and put it into physical gold or the currencies of emerging markets which are running large trade surpluses. I personally believe gold is the better bet of the two.