Japan, the world’s second-largest economy is shrinking.

Japan, the world’s second-largest economy shrinking, worst since 1974 Oil Shock

Feb. 16 (Bloomberg) -- Japan’s economy shrank at an annual 12.7 percent pace last quarter, the most since the 1974 oil shock, as recessions in the U.S. and Europe triggered a record drop in exports.
Gross domestic product fell for a third straight quarter in the three months ended Dec. 31, the Cabinet Office said today in Tokyo. The median estimate of 26 economists surveyed by Bloomberg News was for an 11.6 percent contraction.
Exports plunged an unprecedented 13.9 percent from the third quarter as demand for Corolla cars and Bravia televisions collapsed amid a slump that the Group of Seven nations said will persist for most of 2009. Toyota Motor Corp., Sony Corp. and Hitachi Ltd. -- all of which forecast losses -- are firing thousands of workers, heightening the risk a decline in household spending will prolong the recession.
“The economy is in terrible shape and the scary part is that we’re likely to see a similar drop this quarter,” said Seiji Adachi, a senior economist at Deutsche Securities Inc. in Tokyo. “All we can do is wait for overseas demand to pick up.”
The Nikkei 225 Stock Average fell 0.4 percent at the close in Tokyo, extending the year’s losses to 13 percent. The yen rose to 91.59 per dollar from 91.76 on speculation Japan will refrain from taking measures to weaken the currency. The yen’s 18 percent gain over the past year has compounded exporters’ woes by eroding the value of their overseas sales.

Worse Than U.S., Europe
The world’s second-largest economy shrank 3.3 percent from the third quarter, today’s report showed. That compared with the U.S.’s 1 percent contraction and the euro-zone’s 1.5 percent decline, which was the sharpest in at least 13 years.
“There’s no doubt that the economy is in its worst state in the postwar period,” Economic and Fiscal Policy Minister Kaoru Yosano said in Tokyo. “The Japanese economy, which is heavily dependent on exports of autos, electronics and capital goods, has been severely hit by the global slowdown.”

EU economy hit hard by global downturn, gloomy outlook

EU economy hit hard by global downturn

The Commission expects EU and eurozone economies to shrink almost 2% in 2009 before recovering moderately in 2010. (January 19)

Commission cuts economic growth forecast as scale of financial crisis and ensuing global downturn become apparent.
The Commission estimates that economic growth fell to about 1% in 2008 in both the EU and the eurozone (down from just below 3% in 2007). The latest forecast projects that real GDP will contract by almost 2% in both regions in 2009, before growing again by about 0.5% in 2010. These figures are lower than the autumn forecast.
With the EU economy expected to shed some 3.5m jobs this year, unemployment is set to rise. The rate is forecast to reach 8¾% in the EU in 2009 (9¼% in the eurozone), with a further increase in 2010.
Public finances will be hit, too. The headline deficit for EU countries – a raw measure of budget shortfalls – is expected to more than double this year, from 2% of GDP in 2008 to 4½ % in 2009 (from 1¾ % to 4% in the eurozone). As a result, several EU countries are projected to breach or stay over the EU deficit cap of 3% of GDP. A further worsening of the budgetary outlook is expected for 2010.