Japanomics

We're not technically in a recession yet.  But apparently, Japan is:

Gross domestic product, the widest measure of economic activity, fell 0.6% from the previous quarter on a seasonally-adjusted basis, the government said early Wednesday. That translates to an annualized rate of decline of 2.4%, and it represents the first quarterly contraction in a year.

The decline was the largest in nearly seven years, coming as rising prices of energy, food and raw materials hit consumers and corporations. Many Japanese companies are suffering from higher costs of materials at the same time as their sales decline around the world, and they are responding by cutting production. Japan is particularly vulnerable to higher energy prices, as it relies nearly entirely on imported oil.

They're being hit hard by the shrinking American trade deficit, among other things.  And unlike American consumers, Japanese people respond to rising prices by buying less stuff, instead of borrowing the money to keep their consumption level.

Though some hysterical commentator will undoubtedly say it, this isn't a harbinger of another decade-long decline; it's the natural result of a bad patch in the global economy.  The problems that sapped Japan's economic strength in the late nineties and the early half of this decade have been at least partially dealt with:  its banking system is no longer so prone to keep underperforming loans on their books, throwing good capital after bad, and its corporations have become more flexible.

What this does indicate is how dependent the global economy remains on the American consumer.  Most of the other large industrialized nations have so far failed to generate robust growth in domestic demand, which means that every time we cut down on imports, their economies swoon.  That has to change, because American consumers can't keep borrowing and spending forever.