Curiously, Bloomberg analysts go with opebo's interpretation, even though I have no idea how the math adds up. According to the analysts,
"Net exports -- the difference between exports and imports -- accounted for 2.3 percentage points of Japan’s contraction last quarter, according to economist forecasts. Domestic demand, which includes household spending and capital investment, probably subtracted 0.9 percentage points from growth, they said."And it makes intuitive sense. After all, Germany is protected by the euro whereas the yen has skyrocketed.
However, I don't see how this is possible. After doing some research, I have calculated that at most Japan went from a 2.5 trillion yen surplus in the 4th quarter to a 600 billion yen deficit, or about 3.1 trillion yen, or about 12 trillion yen annuals. Whereas it's total GDP is around 550 trillion yen. So to get a fall of 2.3 x 4 = over 9% of GDP, it would have had to accounted for a nearly 50 trillion yen annual difference, not a 12 trillion yen annual difference.
On the other hand you're also not right because December retail sales (presumably the worst month) only fell
2.7 percent from a year earlier.
So what is going on? The answer is that industrial production is collapsing (at something like a 25% annual rate), but I'm not sure why.
Update:
Nevermind, I see my mistake. The 11.7% is an annural rate extrapolated from the quarterly 3.1% fall. It assumes not only the one-time decline of December continued for a year, but that GDP continues to fall by about 3.1% each quarter for a year. So in my math above, it would be the equivalent of Japan's trade balance deteriorating by 3.1 trillion each quarter.
The actual math is much simpler. Japan's quarterly GDP must be between 125 and 150 trillion yen, so a 3.1 trillion yen is just under 3% of this.
The good news is that the puzzle is solved. The bad news is that given that Japan's exports dropped by 35 percent at an annual basis in December, compared to a 23 percent annual basis for the quarter, we can probably expect an even worse GDP figure for the first quarter of this year.
