Japan’s situation adds to Asia’s instability

Chinese financial markets have entered for several weeks in a worrying downward spiral that could be both the beginning of the bursting of a financial bubble and the early signs of a deeper structural crisis. Now that China’s situation is raising questions, it is already impacting Japan’s.

According to Reuters, Japan’s economy shrank at an annualized pace of 1.6% in Q2 2015 while trade deficit widened as export growth slowed. The negative trend of these three factors translates the concrete deterioration of Japan’s economic situation, both inside and outside its borders. In addition to jeopardizing Abenomics’ objectives – Prime Minister Shinzo Abe’s economic policy – Japan’s situation is another indication of a degraded economic environment in Asia.

If Japan’s situation doesn’t depend on China only, it seems relevant to remind that the fact that the two countries – second and third world’s largest economic powers – are simultaneously going through troubles is not necessarily a matter of chance. In case of continued difficulties, Cyceon renews its warning as for possible increased geopolitical tensions in Asia.