Western Australia will not be immune from Japan's worst economic slump since World War II, however demand will continue for key commodities iron ore and liquefied natural gas, an economist said.
New data released earlier today showed the Japanese economy, the world's second largest, shrank for a third straight quarter in the three months to December, the weakest performance since 1974.
Chamber of Commerce and Industry WA chief economist John Nicolau said while it would be naïve to think Japan's situation would not have an impact on WA, however context needed to be provided.
He said any impact on WA will depend on how long Japan's economy remains in a contractionary phase and the relationship between both eocnomies.
"Looking at WA's key commodities such as iron ore and LNG, these commodities will remain in demand notwithstanding the current economic downturn and that's because energy is an important building block to Japan's economy and so is iron ore," Mr Nicolau said.
He added that the extent of the impact on iron ore price negotiations on the back of the latest growth figures remains to be seen.
Analysts are widely tipping a 20 to 30 per cent fall in the benchmark iron ore price, with some forecasting a 50 per cent fall.
Meanwhile Japan's major investments in the state such as the Oakajee deepwater port will not be affected due to the long-term nature of the project, Mr Nicolau said.
Premier Colin Barnett is currently on a four-day visit to Japan, where he will meet with dignitaries and company representatives.