Japan was once largely intact after financial crisis erupted in the United States. However, the world' s second largest economy is feeling more pain than Europe and the United States after the financial woes developed into a global economic slump.

Data show that the Japanese economy has actually declined by an annual rate of 12.1 percent in the fourth quarter of last year, much higher than the 6.2 percent in the United States, and 5.7 percent in the euro zone.

This year, the Japanese economy showed no signs of improving. The majority of research institutions and economists in Japan believed that in the first quarter of this year the economy will continue to appear double-digit negative growth.

Recently, the World Bank released a forecast report saying that in 2009 the world economy will drop 1.7 percent. However, Japan's economy will drop 5.3 percent, still far higher than 2.4 percent decline in the United States and the euro zone's 2.7 percent.

Then, why the crisis originated in the United States have taken the highest toll on Japan?

First, the United States and some countries in the euro zone follows a financial and real estate market-driven economic growth model, while Japanese economy is heavily dependent on export, which in the fourth quarter of last year plummeted 13.8 percent from the previous quarter, a record figure in history.

Secondly, the United States and Europe is the world's most important consumer market. The financial crisis has gradually eroded their actual economy and then the consumer market shrunk. However, Japan's recession was mainly due to the declining demand in its exports, which then led to the deterioration of corporate earnings and the financial market turbulence.

Thirdly, because of birth rate reduction, aging population and some other reasons, Japan's domestic consumption has been in a slump in recent years, which increased Japanese economy's external dependence. The deterioration of the external environment has a huge impact on its manufacturing industry. Downturn in manufacturing sector also had a negative impact on the non- manufacturing industries.

A string of figures show the impact is far-flung. In the last quarter of 2008, private investment in equipment contracted by 5.4 percent. At the same time, Japan's employment situation is also deteriorating and in February this year, the unemployment rate rose to 4.4 percent.

To sum up, both external and internal factors make it more difficult for Japanese economy to recover. Only when Japan's major trading partners started to pick up and demand began to restore, the Japanese economy can bottom-out and grow again.

(Xinhua News Agency April 5, 2009)