By: Dr. Mike Campbell
Japan is a nation which relies on its exports to the rest of the world for its economic prosperity. The value of the US Dollar has depreciated by more than 10% against the Yen over the course of the year, making Japanese imports to the US that much more expensive. The same story (but not to the same extent) has been repeated with her other trading partners, squeezing the demand for Japanese products.
It is not as if Japan is immune from the debt problems that have devalued the Euro, or the economic slowdown (real or imagined) that was blamed for the decline of the Dollar. It is just that the Yen has looked to be the best current bet for a safe haven currency and the demand has kept the Yen artificially high (much to the chagrin of the Japanese authorities).
The higher value of the Yen has been blamed for a slowdown in Japanese manufacturing. Figures reveal that the Japan Manufacturing Purchasing Manager’s Index (PMI) has dropped to 46.9; any value below 50 shows a contraction. The November value was the third consecutive reading showing a contraction. The rate of decline in November is the greatest seen for 19 months. Many analysts were expecting Japan’s Q3 data to show weak growth or even an overall contraction, but domestic factors provided a positive reading.
Further woes for Japan have come in the shape of a rise in unemployment to 5.1% for October. Whilst this level of unemployment would be a source of pride in many other countries, for Japan it represents a very high level and is indicative of the problems confronting the nation.