Policy Responses from Four Economies
Edited by Daigee Shaw and Bih Jane Liu
Chapter 7: Why Was Japan Hit So Hard by the Global Financial Crisis?
1 Masahiro Kawai and Shinji Takagi 7.1 INTRODUCTION Japan was hit hard by the global financial crisis of 2008–09; it was the only major advanced economy that experienced negative economic growth in 2008 and continued to contract sharply in 2009 (Figure 7.1). Although most advanced countries experienced recession in 2009, Japan’s economic contraction (−5.2 per cent) surpassed the contractions experienced by the United States (US) (−2.4 per cent), the Euro Area (−4.1 per cent),2 and the United Kingdom (−4.9 per cent), where the financial crisis for the most part originated. In contrast, most of Asia’s major economies fared much better, notably with China, India and Indonesia maintaining positive growth during 2009. Though Singapore and Taiwan were hit hard initially by the global financial crisis, they recovered rather quickly to limit the extent of economic contraction to 2 per cent or less for the year as a whole. When the US subprime loan problem came to the surface in the summer 15 Growth for 2008 10 5 0 –5 Euro Area Hong Kong Singapore Indonesia Japan US UK Korea Taiwan China India Malaysia –10 Thailand Growth for 2009 Source: International Monetary Fund (2010). Figure 7.1 Economic growth (annual percentage change) for selected countries in 2008 and 2009. 131 M2627 - SHAW TEXT.indd 131 25/05/2011 13:06 132 The impact of the economic crisis on East Asia Table 7.1 Direct impact of the global financial crisis on the US, Europe and Japan Credit-related write-downs in the banking sector (billions of...
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