Japan’s Export Growth Continues to Weaken

By: Dr. Mike Campbell

Much in life is relative. Certainly, year on year statistics fall into that category when you factor in factor in the worst recession in 80 odd years as the benchmark for the data. Japan’s exports are still growing, compared to how things stood twelve months ago, but the rate of that growth has been dwindling for the past six months. Japan is still (just) the world’s second largest economy and if the recovery is faltering there, it sends alarm signals out to the rest of the world.

Back in February, Japan’s exports showed a staggering 45.3% growth over where they had been a year earlier. The current figures for August show a pretty impressive 15.8% growth on how things stood a year before. But we come back to relativity. The data in 2009 was very weak following the acute phase of the global recession which started in the second half of 2007 and “ended” in spring 2009 (that’s to say things stopped getting worse about then). So the fact that the pace of growth is dropping, is a cause for concern.

Japan is an exporting nation and its currency is close to a 15 year high against the American Dollar, making Japanese imports more expensive within the US market. The Bank of Japan has already interceded to depreciate its currency by selling Yen and buying Dollars, but the market has absorbed these efforts to a very large extent. The Dollar is currently trading at about 84.21 Yen; at the time of the intercession, it almost hit the 86 Yen mark. Japan is still battling low domestic demand, high unemployment and deflation. These concerns should weaken the Yen, but that is not happening yet.