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This Far East crisis could be threat to UK as well.

Byline: CLINTON MANNING

FEARS that the Japanese economy could be heading for a kamikaze crash will send shockwaves around the world.

With the US and UK still reeling from the recession, hopes were pinned on China and Japan to provide the engines of growth.

But the second-biggest economy is also in trouble and the Japanese will be tightening their belts along with the rest of us.

This could shrink an important market, tipping more companies into crisis and its trade partners back into recession.

If domestic demand falls further it could hit the profits of Japanese companies, limiting their ability to invest overseas.

This could be damaging to the UK where the only car manufacturers of real note, apart from BMW's Mini, are Japanese.

If Toyota, Honda or Nissan are forced to slam the brakes on production it could hit UK jobs.

It could reduce UK tax revenues and, as many of the cars built here are exported, it could also put another dent in our balance of payments.

But not everyone is convinced it is as dire as the new Japanese prime minister Naoto Kan says.

The government has spent the past 20 years borrowing money to spend in the hope of stimulating the stagnant economy.

It hasn't been too successful but it hasn't led them to the abyss either.

The success of hi-tech firms such as Sony and Hitachi mean Japan exports far more than it imports.

Some believe Mr Kan is scaremongering to soften up the Japanese for unpopular tax increases.

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Publication:The Mirror (London, England)
Date:Jun 12, 2010
Words:258
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