Japanese Economy Continues to Decline

The Japanese economy continues to weaken along with many other economies throughout the world. The question that has to be asked is whether or not the US will follow in their footsteps. Text in bold is my emphasis. From Market Watch:

Bank of Japan Gov. Masaaki Shirakawa said Friday the Japanese economy is worsening and the downturn has yet to run its course, according to reported comments.

Shirakawa, speaking at the central banks' quarterly branch managers' meeting in Tokyo, warned employment and wage conditions would deteriorate further and that company earnings and the ability to raise funds remain under intense pressure.

"Under these circumstances, the possibility is high that the nation's economy will continue deteriorating for the time being," Dow Jones Newswires quoted Shirakawa as saying.

The tone of the comments reflected a deep sense of gloom, raising the likelihood the central bank would revise down its growth outlook when it releases its semiannual outlook report on the economy April 30.

In January, the central bank said in its interim report that the economy would suffer its worst contraction since World War II. It lowered its outlook for real gross domestic product growth in the fiscal year begun in April to a 2% contraction, down from the 0.6% rise it had forecast in October.

"It's necessary to pay careful attention to the possibility that, due to worries over falls in stock prices as well as the worsening economy, [conditions] may start affecting the stability of the financial system," Shirakawa said.

The central banker also raised the deflation alarm, saying wholesale prices are likely to keep trending lower as commodity prices continue to cool amid weak global demand.

Japan's wholesale prices fell 2.2% in March from the year before, data released earlier this week showed. The rate of decline was the sharpest in nearly seven years, and is believed to reflect softening global demand.

The data were also viewed as showing demand in Japan had yet to show much signs of life after months of gloomy news flow on the state of the economy.