Japan has come out of recession after its economy grew by 0.9% in the April-to-June quarter. The growth comes after four consecutive quarters of contraction. Correspondents say the rise is due to a huge government stimulus package and it is unclear whether the momentum will be sustained when this is concluded.
And, indeed, it is unclear. Germany and Japan are the two great exporters of the developed world. But given the level of household indebtedness and plummeting wealth, it’s just not possible for the US to sustain the volume of imports that we used to. And the same is true of other, smaller housing bubble countries countries—Ireland, Spain, Australia, etc. Which means that sustained recovery, as opposed to three or six months of growth driven by temporary stimulus or inventory rebound effects, require these countries to either find more domestic customers for what they make or else more customers in China and India.