Even though the fourth quarter growth figures for Australia next week look a bit better than previously thought, there was a horrible reminder this morning of the trainwreck coming at us from Japan.

Japanese industrial production plunged a record 10% in January, as forecast by most Tokyo economists, topping December’s disastrous slide of 9.8%.

Output in January was 30.8% lower than January 2008, to go with the near 46% plunge in exports reported earlier in the week.

With GDP falling an annual 12.7% in the December quarter, there are indications that this quarter could be worse.

In fact the Japanese Trade Ministry said the a fall of 8.3% was expected this month, but a rebound in March of 2.8% was expected. according to the ministry’s forward surveys.

March is the end of the financial year when companies quite often start production for the new financial year.

The Ministry said that “industries that mainly contributed to the decrease are as follows: 1. Transport equipment 2. Electronic parts and devices 3. General machinery, in that order. Commodities that mainly contributed to the decrease are as follows: 1. Large passenger cars, 2. Metal oxide semiconductor ICs (Logic), 3. Small passenger cars, in that order.”

This news and further evidence overnight of a deepening recession in the US, means the Reserve Bank will probably cut rates by up to 0.50% at its meeting next Tuesday.

Our 4th quarter GDP figures are out next Wednesday and will show that compared to our major trading partners (Japan, the US, UK, Europe, New Zealand, South Korea and Taiwan) our economy has reasonable growth.

Only Chinese GDP may have grown better than hours, but even then its slowing. If our GDP grows by anything more than 0.1% seen in the September quarter, then we will be able to blame the spending spree in December from the first stimulus, and better than expected spending by business on investment and construction work.

To that end total credit grew 0.6% in January, according to figures from the reserve Bank today, thanks in part to a pick up in business spending, and slightly higher personal and investment housing spending.

The rise of 0.6% was much stronger than the decline of 0.2% in December.

Next week we also get retail sales, international trade and building approvals for January, which will tell us a bit more about how the economy is travelling.

In fact the trade figures will reveal the impact of the resources slump on our export prices and volumes. It won’t be pretty after the trade surplus narrowed sharply in December.

Falling demand for coal, iron ore and a host of other products from Japan, Taiwan, South Korea and China will see our exports income slashed this year by upwards of 10%.

Ratings agency, Standard and Poor’s said yesterday that the Japanese economy was sinking into its worst recession since World War II.

The firm said the Japanese economy is expected to shrink 4% this year, which would be worse than the 2% contraction in 1998, when Japan went through its own financial crisis after the “bubble” economy burst.