Japanese exports rose in July at the fastest annual pace in nearly three years as the benefits of a weak yen finally started to take hold while brisk export figures are showing a recovery in overseas demand. Finbarr Toesland finds out.
Goods exported from Japan in July have rapidly increased year after year to reach a three-year high, signaling that there is an uptick in foreign demand and that the benefits of a weak yen are being reaped.
As the Japanese economy is export focused; the Bank of Japan’s massive easing of monetary policy is seen as a significant stimulus thanks to the country’s international competitiveness.
However, all news is not good for the Land of the Rising Sun. There has been a strain on Japan’s reliance on overseas energy and the trade balance has been in deficit for the past 13 consecutive months, due to historically high import levels and increasing oil prices. Japan also faces the unique problem of having discontinued their nuclear reactors after the Fukushima disaster in 2011, leading to an even greater energy charge.
There has been a strain on Japan’s reliance on overseas energy and the trade balance has been in deficit for the past 13 consecutive months, due to historically high import levels and increasing oil prices.
At 1.02 trillion yen the July trade deficit is the third highest since records began, far over the projection of a 785.6 billion yen deficit. Whilst the 12.2% increase in exports was lower than the 13.1% annual growth projected by economists, the data was still seen as a step in the right direction as exports to the United States, China and Europe all saw increases.
“We expect exports to continue to recover,” said Hiroaki Muto, senior economist at Sumitomo Mitsui Asset Management Co. “The details are encouraging because you can see that exports to Japan’s main markets are bouncing back.”
Japanese exports to China, which is the country’s biggest trading partner, increased by 18.4% greater than the projected 14.6% rise in the year to July. A depreciation of around 20 percent in the yen since last November, when markets began expecting the aggressive easing in monetary policy undertaken by the Bank of Japan in April, has increased the competitiveness of the export-driven economy.
The United States and European Union both saw imports from Japan climb 18.4% and 16.4% respectively this year indicating a positive trajectory and an increase in Japanese exports.
By Finbarr Toesland