Japanese industrial production collapses

I featured this chart recently, and today we got new data for Japan. The Bloomberg headline reads "Japan headed for its worst postwar recession in December as factory output slumped an unprecedented 9.6%, unemployment surged and households cut spending." That's grim, and the chart puts it into global perspective. This is a globalized world, and the U.S. economy remains the most resilient of all, in part because trade is a much smaller part of our economy, and the last three months of 2008 were marked by a gigantic reduction in global commerce. One cause of the huge slowdown was the difficulty that exporters had getting letters of credit from a global banking system that was suddenly in complete disarray. I think that problem is going away rapidly, however, so we are not likely to see a more serious collapse, and should begin to see some recovery. As I noted recently, the Baltic shipping indices have picked up quite a bit of late, as have most commodity prices, suggesting that global trade is recovering.