Tokyo, 17 Nov. It’s official: Japan is now in a recession. The world’s second-largest economy reported a .1% drop in its third quarter, after a .3% fall in its second quarter.Japan’s GDP has dropped by almost half a percent this year.

The world is bracing with the two largest economies in recession. The US officially fell into a recession after its financial markets collapsed. The US lost 240,000 jobs in October and unemployment reached 6.5%, the highest in 14 years.

Europe is in a similar state with the 15-nation EU reporting a GDP decline of .2% for the second consecutive quarter. Germany and Italy, the two largest economies that use the euro are in recession, although France is not.

The yen has been strong which has had serious negative effects on the country’s stock markets, which spread to European and US exchanges. The yen has strengthened as investors shied away from higher-yielding currencies such as the pound and the euro. The result was the yen and dollar increasing in value as they are considered safer and more secure.

But with this appreciation in the yen exports have hurt as well, as it has become more expensive to purchase Japanese goods. This was reflected in the fact that Nissan Motor Co. announced it would slash production by a further 72,000 vehicles from now until March 2009. Last month it announced it would cut production of 65,000.

Takahiko Murai, Nozomi Securities general manager, expressed concern that Japan relied so heavily on exports, "We have no factors to expect the GDP figures will be revised up later as a deterioration in U.S. consumer spending is happening really fast, and a resulting firmer yen could further damage Japan's economic outlook.”

Hong Kong and Singapore are also in recessions. They too, like Japan, are heavily export-reliant nations that are thus vulnerable to any global slowdown.

One consolation these slowing Asian economies have is China as a neighbor, which is projected to still grow by 7% or more. Emerging economies should grow by 7.2% next year from 8.9% this year, according to Citigroup estimates.

Hiroko Mirafiori, EconomyWatch.com