Clinton lands in Japan amid worst economic news in 40 years

U.S. Secretary of State Hillary Clinton arrived in Japan Monday on her first international trip as President Barack Obama's top diplomat.

Although her official agenda is dominated by talks about North Korea's nuclear program and trade issues, her arrival coincided with the release of statistics showing the Japanese economy in its steepest decline in decades.

Japan's gross domestic product, or the total value of the nation's goods and services, dropped at an annual pace of 12.7 per cent in the fourth quarter of 2008, the government said Monday.

That's the steepest drop for Japan since the OPEC oil shock of 1974. It far outpaces declines of 3.8 per cent in the United States and 1.2 per cent in Europe.

The contraction underscores the vulnerability of Asia's export-driven economies during global downturns and points toward more cuts in jobs, production and profits in the coming months. A survey of economists by the Kyodo news agency had projected an 11.6 per cent fourth-quarter contraction.

It was Japan's third straight quarter of decline, according to figures by the Cabinet Office.

The news sent the benchmark Nikkei 225 index lower when stock markets opened, but it quickly rebounded, rising 1.52 per cent in morning trading.

'They need each other'

CBC's John Northcott, reporting from Tokyo, says the mood in the Japanese capital is gloomy, with retailers attempting to get customers into their shops by slashing prices by 50 per cent or more.

Northcott says Japanese officials are looking forward to talks with Clinton about boosting trade and other activities between the United States and Japan, the world's first and second largest economies.

"They need each other," Northcott says. "Japan is an export-driven economy and their exports have dropped and they are badly waiting for U.S. consumers to get back on track and start buying cars and appliances again."

Just before she landed in Tokyo, Clinton said she hoped to kick-start high-level talks involving six countries — the United States, Japan, China, North and South Korea and Russia — aimed at dismantling Pyongyang's nuclear weapons program.

"The North Koreans have already agreed to dismantling," Clinton said in an arrival statement. "We expect them to fulfil the obligations that they entered into."

Last year, the North Koreans agreed to dismantle some aspects of their nuclear program in exchange for fuel and other help with a struggling economy.