Japan’s economy contracted at a much-worse-than-expected 3.7% annualized rate in the January-March period, tipping the country into a recession as the March 11 earthquake and tsunami caused declines in consumer spending, business investment and private-sector inventories.
The article is here. It’s not worse than I expected, or worse than what Michael Mandel expected. The simple lesson is that earthquakes and tsunamis are contractionary, not expansionary. This is a classic example of real business cycle theory and how it can also apply to economies which are, in some regards, still in Keynesian corridors.