The party is over in Shanghai and everyone is leaving. This is only the beginning; the worst is yet to come. The Japanese are on the way out. The Japan news is bleak!!

Japan logs record trade deficit as exports collapse

TOKYO — Japan’s recession woes deepened as exports plunged at the fastest pace ever last month, leaving Asia’s biggest economy with a record trade deficit, official figures showed Wednesday.

Japan’s heavy reliance on foreign demand to drive its recovery from a decade-long slump has left it vulnerable to the current global economic slowdown, which has sent sales of cars, televisions and other goods tumbling.

Japan’s trade deficit ballooned to 952.6 billion yen (9.9 billion dollars) in January as exports plunged 45.7 percent from a year earlier, the finance ministry reported.

It was the worst month since records began in 1979, marking a dramatic shift in fortunes for Japan’s economy, which used to enjoy large surpluses thanks to brisk demand for its high-tech products.

Once seen as relatively immune to the global downturn, Japan’s economy has become one of the worst affected, exposing the fragility of its export-led rebound after the 1990s recession.

Analysts expect Japan to report Friday a record 10 percent drop in factory output in January from the previous month. Unemployment is also forecast to rise as corporate icons such as Sony and Toyota slash thousands of jobs.

“Because of the shrinking global economy, Japan’s business model of being dependent on exports is not working at all,” said Barclays Capital chief Japan economist Kyohei Morita.

But with the population declining and the government reluctant to admit foreign workers, Japan has no choice but to rely on overseas markets, said Morita, who sees exports falling until the third quarter of this year.

Demand for Japanese exports has been crushed by a slump in worldwide consumer spending, pushing the world’s second largest economy into its worst recession in decades.

A surging yen has added to exporters’ troubles, making it harder for them to remain competitive.

Japanese exports to the United States and the European Union area roughly halved in January. Car exports plunged more than two-thirds as automakers idled plants in response to slumping sales.

Few analysts are optimistic about the chances of a significant rebound in Japanese shipments any time soon.

“In my view the global economy is heading into a depression. So the prospect of a recovery in demand for Japan’s goods in the near- to mid-term are very low,” said Kirby Daley, senior strategist at Newedge Group in Hong Kong.

The government said last week that Japan’s economy was in the deepest crisis since World War II, after contracting at an annualised pace of 12.7 percent in the last quarter of 2008, the worst performance in almost 35 years.

The worsening recession comes at a time when Japan’s ruling party is facing the risk of losing its half-century grip on power, with Prime Minister Taro Aso’s popularity plunging along with the economy.

Japan’s unemployment rate rose to a near three-year high of 4.4 percent in December and looks likely to top the post-World War II peak of 5.5 percent later this year, analysts said.

“With the export sector extremely weak and the domestic economy weakening, there is a growing risk that you could get a significant rise in Japanese unemployment,” said Christopher Wood, an equity strategist at the CLSA bank.

Japan’s jobless rate may even head towards 10 percent, he warned.

Downturn drives expat exodus from Shanghai

By Patti Waldmeir in Shanghai and Kathrin Hille in Beijing

Published: February 24 2009 17:36 | Last updated: February 24 2009 17:36

Until recently, half the 100,000 Koreans who had made Shanghai their home lived clustered together on the outskirts of the city in “Little Korea”, a neighbourhood where the street signs are in Korean and the shops are full of LG products and kimchi food.

But with the economic crisis hitting the South Korean economy and currency hard, Little Korea is being rapidly vacated.

Korean companies are shipping workers home, cutting off school fees and repatriating wives and children without their menfolk to cut costs. They are the first large wave of expatriates to have begun leaving China’s financial capital as a result of the global economic crisis but their departure raises the prospect of a broader exodus of foreigners who may take investment, skills and job creation opportunities with them.

The press officer of the Korean consulate in Shanghai could not answer questions about the exodus of her countrymen – because her post had just been abolished and she was being sent back to Korea.

Kim Heewon, president of Seoul Plaza, Little Korea’s central shopping complex, estimates that 20 per cent of the Korean population has returned home, many of them in the past few weeks.

“Almost no one comes in any more,” says a clerk in Seoul Plaza’s golf boutique. Throughout Ms Kim’s 4,000-squ-m department store, Korean-speaking staff loiter next to Korean-branded toys, clothing and furniture, with no customers in sight.

Japanese relocation companies, meanwhile, say there has been a marked rise in Japanese families returning home from Shanghai compared with last year and they expect the pace to pick up further during the traditional peak relocation months of March and April.

Each of the Japanese housewives minding toddlers at the vast Mandarin City housing complex, where an estimated 70 per cent of residents are Korean or Japanese, say they know at least one family that has been sent home while the breadwinner remains in China.

The Japanese consulate estimates there were 48,000 nationals in Shanghai 18 months ago, but says it has no figures for the number that might have left since.

The pain has not been limited to Shanghai. A parent with children enrolled in an expensive Beijing international school says most of her daughters’ Korean classmates have left the school almost overnight.

A labour activist in the northern province of Shandong, where Korean investment has totalled $23.4bn (€18.4bn, £16.2bn) since 1988 and has accounted for 40 per cent of total foreign inflows, says the owner of a Korean-invested furniture factory left before the Chinese lunar new year in January and it has yet to reopen.

Local authorities that previously published regular data on absconding factory owners halted such reporting after thousands were left jobless when the entire Korean management of Yantai Shigang Fibre vanished last year.

“I would guess that even more have been closing since then given the worsening macroeconomic environment,” says Yuan Xiaoli, a professor at Qingdao University of Science and Technology.

Back in Little Korea, Ms Kim says the flow of Koreans is not one way. “Workers are going home, but entrepreneurs are coming here from Korea,” she says. “Our Korean people think [since] China is bigger than Korea, there must be more opportunities here than in Korea. There is no dream in Korea, but our Korean people think there is still a dream in China.”

Ms Kim is putting her money where her mouth is. She is planning to open a large golf goods store in Seoul Plaza early next month