Growing global apprehensions about a Russian default might well make foreign lenders to Japanese banks still more skittish, even if the source of the worries seems unrelated to Japan. If the impact of Russia's financial troubles cuts several ways for Japan, the effect of plunging commodity prices does not. Like such other raw material producers as Canada, Russia has struggled this year as the prices of oil, food and other commodities have plummeted, in part due to a slowdown in Asian demand. Although opinions differ, some analysts have noted that the response of producers, especially in Russia, has been to jack up production in an effort to maintain revenues, a strategy that is self-defeating if widely copied. For Japan, however, these developments are a rare piece of great news.
Imports fill a large fraction of domestic demand for raw materials.
Consequently, for Japanese manufacturers and consumers, plunging global commodity prices have the same effect as a multitrillion-yen tax cut. In August and early September, the arguably positive, if small, impact of developments in Russia on the Japanese economy was swamped by other concerns involving Japan's important trading partners. For example, Wall Street's contraction had a self-fulfilling quality to it. A stock market decline, if sustained, would reduce American wealth, which might induce consumers to spend less. The U.S. expansion is thereby threatened.