Japanese machine orders just sank to a 22-year low...

IF WE ARE SLIPPING into a Japan-style depression, as signaled perhaps by the swollen demand (and supply) for government debt worldwide, then recovery might take longer than almost anyone guesses.

Twenty years could be too soon, in fact. At least on the Japanese model.

"Clearly, the Japanese economy is not performing as many expect it to," reports the ever-invaluable Japan Economy News.

No fooling. Rising 54% to new monthly highs from the first-quarter of 2002 to the start of 2008 (and spiking as the US Dollar collapsed together with Bear Stearns that March), the Yen-value of Japanese machine orders has sunk back to the level of 22 years ago.

That was prior to the top of Tokyo's real-estate and equity bubbles in 1989 – a whole heap of going nowhere that says over-capacity is baked in the crust yet again.

"The Cabinet Office announced that core machinery orders in Japan fell 3.0% in May to ¥668.2 billion [$7.2bn]," Ken Worsley goes on, citing the data with orders in more volatile sectors stripped out. "Although this is less than the 5.8% drop seen in April, it still means that machinery orders have fallen to a new all-time low. May was the third month in a row that core machinery orders have fallen."

Capital spending in the iron & steel sector fell 46% from May '08. Transport orders fell 50% on a year earlier.

Okay, you can blame it on Lehmans failing last autumn if you must. Everyone else will, even if global demand and output had clearly turned down long before then. But the idea that depleted stockpiles of consumer and industry goods will at some point spark a self-inspired rebound is just the kind of "How bad can it get?" hopefulness Japan repeatedly poked in the eye over its first decade of post-bubble slump.

Now "More and more Japanese firms are going bankrupt," Worsley continues, noting how Tokyo Shoko Research said June saw 1,422 firms with debts above ¥10 million ($100,000) go under – the worst June for bankruptcies since 2002, back when the threat of US deflation first led the Fed to follow Japan towards near-zero interest rates.

But cheer up – that all worked out fine. I mean, how bad can it get?