Just a day after the Bank of Japan announced further stimulus measures to help Japan’s economy, data has been released which show that the economy is slowing.
The data relates to Japan’s balance of trade position and shows that both exports and imports have declined compared to where they stood at this time last year. Exports showed a year-on-year decline of 5.8% in August. The figure was almost matched by a 5.4% decline in goods imported to Japan over the same period. The falling import demand suggests a slowing down of domestic demand; particularly when the fact that Japan has had to import substantially more fossil fuel to make up for the loss of electricity generation capacity from nuclear power plants taken off-line in the aftermath of the tsunami.
The European Union is a major trading partner of Japan’s and exports to the EU have fallen for the 11 months to August. This reflects both the specific problems that the Eurozone has faced because of the on-going sovereign debt crisis, but also the general decline in global demand as many economies slide back to recession.
Japan’s single largest trading partner is China and demand from that quarter has also slowed as its own economy has slowed. The situation with China is also giving cause for concern going forward because of a flare-up of tensions over the sovereignty of disputed islands in the East China Sea. The matter raises passions on both sides and this resulted in attacks on Japanese businesses and products in China.
Demand from the USA remains weak as the world’s largest economy limps forward in a muted recovery. As we noted yesterday, Japan’s woes are compounded by the fact that the value of the Yen is near record levels against other major currencies. Japan suffers more than most from China’s tacit linkage of the Yuan to the fortunes of the US Dollar, of course.