TOPICS > Economy

Global Markets Sputter as U.S. Focuses on Stimulus

February 16, 2009 at 6:00 PM EDT
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The economy continued its decline, with Japan reporting a worse recession than in Europe and America. Tom Bearden gives an update on the world economic outlook.

JUDY WOODRUFF: There was no respite from recession on this holiday Monday in the U.S. Japan reported an even deeper recession than in Europe and America, and world markets shuddered.

Tom Bearden has our lead story tonight.

TOM BEARDEN, NewsHour correspondent: The bad economic numbers kept rolling in today, this time from the world’s second-largest economy.

The worse-than-expected figures in Japan showed economic activity contracted at a 3.3 percent rate in the fourth quarter of 2008. It’s the worst number since the oil shock of 1974.

Kaoru Yosano, Japan’s economic minister, spoke in Tokyo.

KAORU YOSANO, minister of State for economic and fiscal policy, Japan (through translator): And there is no doubt that we are facing the worst economic crisis in the post-war era.

TOM BEARDEN: There was no reaction on U.S. markets, closed for Presidents Day, but markets across Asia and Europe fell.

All this came as Secretary of State Hillary Clinton arrived in Tokyo, beginning her maiden voyage as America’s chief diplomat.

HILLARY CLINTON, secretary of State: The U.S.-Japanese alliance is vitally important to both of our countries, to the Asia-Pacific region and to the world. And our partnership stretches back half a century. Its foundation has been, and always will be, a commitment to our shared security and prosperity. But we also know that we have to work together to address the global financial crisis, which is affecting all of us.

TOM BEARDEN: In fact, two household names from Japan, Toyota and Sony, have already announced deep job cuts, and there is deepening worry over the country’s banks. Economist Adam Posen is a veteran Japan watcher at the Peterson Institute.

ADAM POSEN, Peterson Institute for International Economics: The real message for the broader world is twofold. First, there’s no escape. Japan’s banks actually had made very few mistakes as compared to European or American banks this cycle, and the country is still being dragged down by the global developments.

And the second thing is, which is unfortunate, is the data is starting to get away from us in the sense that most of us who were forecasting were not expecting things to get this much worse, so this is real news.

TOM BEARDEN: Over the weekend, U.S. Treasury Secretary Tim Geithner underscored the need for global action in talks with the major industrial nations.

TIMOTHY GEITHNER, Treasury secretary: It’s very important to the United States, and I think it’s important to the world economy as a whole, that the major economies together move to put in place as forceful a package of fiscal actions as they can to help get recovery back.

TOM BEARDEN: The meetings ended without concrete proposals for any coordinated moves. U.S. efforts to boost the economy are now tied heavily to the president’s stimulus bill, which Congress approved on Friday. Adam Posen says the package gets money where its needed most acutely.

ADAM POSEN: The biggest thing this package does is get money directly to state and local governments, and that’s the best thing for many reasons. First, state and local governments face hard budget constraints, so they start furloughing or laying off workers or cutting back services the minute they run out of money. If you give them federal government money or loans, they immediately stop doing that, so that’s a huge boost.

TOM BEARDEN: Another major focus for the Obama administration is the government aid plan for Chrysler and General Motors. Both companies are scheduled to present formal plans tomorrow for the use of the $17 billion they’ve received.

Originally, a single car czar was to guide the industry’s restructuring, but the administration reportedly jettisoned that plan. Instead, Secretary Geithner and Lawrence Summers, the White House economic adviser, will chair an auto task force. White House press secretary Robert Gibbs.

ROBERT GIBBS, White House spokesman: The approach that the administration has settled on, I think, provides a vast amount of expertise that crosses a number of governmental agencies and departments and brings in the vast amount of experience that the administration has to deal with the auto restructuring — any auto restructuring issues.

TOM BEARDEN: Gibbs spoke aboard Air Force One today, as the president returned to Washington after a weekend in his hometown, Chicago. But Mr. Obama won’t be in town long. He leaves again tomorrow for Denver, where he will sign into law the $787 billion stimulus bill.