Daniel808
SENIOR MEMBER
- Joined
- Nov 24, 2013
- Messages
- 4,960
- Reaction score
- -8
- Country
- Location
Japan's Trade Deficit widened to an unexpectedly large Y822bn ($8.1bn) in June, contributing to a record shortfall for the first half of the year and raising fresh doubts over the government’s Abenomics strategy to revive growth.
The failure of international trade to contribute to what is now a nearly two-year long economic recovery has been a nagging problem for Shinzo Abe, the prime minister.
Accustomed to being an export power, Japan has watched its trade position deteriorate despite a sharp fall in the yen under Mr Abe. In the the past, a weaker currency has stimulated the economy by boosting the global competitiveness of Japanese cars, electronics and other products. But this time the effects have been less beneficial and the country’s businesses have been hit by a painful rise in the cost of imports.
The trade deficit for the first half of 2014 was the largest since comparable data collection began in 1979, with the value of imports exceeding that of exports by Y7.6tn. The deficit in the same period last year was Y4.8tn – a record then, but still much smaller.
In June, the cost of imports rose 8.4 per cent from the same month a year earlier, to Y6.7tn. Exports fell 2 per cent to Y5.9tn. The monthly trade deficit was the 24th in a row.
A big reason for the persistent deficits has been the disruption of Japan’s nuclear power sector following the Fukushima nuclear crisis in 2011. None of Japan’s surviving atomic plants are operating, amid a heated debate about safety, meaning utilities must import trillions of yen of extra oil and gas a year to maintain electricity supplies.
The yen’s weakened buying power – it is down by a fifth against other major currencies since late 2012 – has made such imports even pricier.
A more puzzling phenomenon has been the failure of exports to take off. Experts have blamed everything from the declining appeal of Japanese consumer electronics brands compared with those of South Korea, to slowing rates of factory investment in China, a major buyer of Japanese made production machinery.
Japanese companies now make many of their products in factories outside Japan, a shift that has allowed them to profit from the rising value of their foreign sales – Toyota and others are pulling in record earnings in yen terms – without increasing output much at home.
“Sluggish export volume is becoming an increasingly serious issue,” said Naohiko Baba, chief Japan economist at Goldman Sachs. “We expect the trade balance to remain in the red for the long term.
Spending by domestic consumers, businesses and the government have offset weak exports during the Abenomics growth spurt so far. But the economy is now trying to shake off the effects of a rise in sales tax that took effect in April, meaning the misfiring trade engine now looms as a larger problem.
Mr Abe has been pushing for a limited revival of nuclear power, which would reduce energy imports, and last week an atomic plant in southwestern Japan was certified by safety regulators, the first time that has happened since tighter post-Fukushima standards were introduced last year.
It could begin operating again as early as this autumn, but additional restarts will take time, and experts say that at most a third of Japan’s pre-Fukushima capacity will be brought back online in the foreseeable future.
Japan’s record trade deficit raises fresh doubts about Abenomics - FT.com
Is Abenomics will fail
The failure of international trade to contribute to what is now a nearly two-year long economic recovery has been a nagging problem for Shinzo Abe, the prime minister.
Accustomed to being an export power, Japan has watched its trade position deteriorate despite a sharp fall in the yen under Mr Abe. In the the past, a weaker currency has stimulated the economy by boosting the global competitiveness of Japanese cars, electronics and other products. But this time the effects have been less beneficial and the country’s businesses have been hit by a painful rise in the cost of imports.
The trade deficit for the first half of 2014 was the largest since comparable data collection began in 1979, with the value of imports exceeding that of exports by Y7.6tn. The deficit in the same period last year was Y4.8tn – a record then, but still much smaller.
In June, the cost of imports rose 8.4 per cent from the same month a year earlier, to Y6.7tn. Exports fell 2 per cent to Y5.9tn. The monthly trade deficit was the 24th in a row.
A big reason for the persistent deficits has been the disruption of Japan’s nuclear power sector following the Fukushima nuclear crisis in 2011. None of Japan’s surviving atomic plants are operating, amid a heated debate about safety, meaning utilities must import trillions of yen of extra oil and gas a year to maintain electricity supplies.
The yen’s weakened buying power – it is down by a fifth against other major currencies since late 2012 – has made such imports even pricier.
A more puzzling phenomenon has been the failure of exports to take off. Experts have blamed everything from the declining appeal of Japanese consumer electronics brands compared with those of South Korea, to slowing rates of factory investment in China, a major buyer of Japanese made production machinery.
Japanese companies now make many of their products in factories outside Japan, a shift that has allowed them to profit from the rising value of their foreign sales – Toyota and others are pulling in record earnings in yen terms – without increasing output much at home.
“Sluggish export volume is becoming an increasingly serious issue,” said Naohiko Baba, chief Japan economist at Goldman Sachs. “We expect the trade balance to remain in the red for the long term.
Spending by domestic consumers, businesses and the government have offset weak exports during the Abenomics growth spurt so far. But the economy is now trying to shake off the effects of a rise in sales tax that took effect in April, meaning the misfiring trade engine now looms as a larger problem.
Mr Abe has been pushing for a limited revival of nuclear power, which would reduce energy imports, and last week an atomic plant in southwestern Japan was certified by safety regulators, the first time that has happened since tighter post-Fukushima standards were introduced last year.
It could begin operating again as early as this autumn, but additional restarts will take time, and experts say that at most a third of Japan’s pre-Fukushima capacity will be brought back online in the foreseeable future.
Japan’s record trade deficit raises fresh doubts about Abenomics - FT.com
Is Abenomics will fail
.
