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Japan’s exports rise at greatest pace since 2010 as deficit swells

Bloomberg

Japan’s exports jumped by the most since 2010 in July, aiding Prime Minister Shinzo Abe’s efforts to drive an economic recovery even as rising energy costs boosted the trade deficit.

Exports increased 12.2 percent from a year earlier after a 7.4 percent rise in June, the Finance Ministry said Monday. Imports climbed 19.6 percent, leaving a trade deficit of ¥1.02 trillion ($10.5 billion), the third-biggest on record in data dating back to 1979. The seasonally adjusted deficit widened from June to ¥944 billion.

The stronger exports show Japan’s economy is starting to benefit from a recovery in demand in the U.S. and Europe, and the yen’s 11 percent decline against the dollar this year. The health of the economy will be the key to Abe’s decision next month on whether to raise the 5 percent sales tax to 8 percent in April.

“The weakening of the currency will benefit the economy, as it will help companies in the auto and IT sectors,” said Hiroaki Muto, an economist at Sumitomo Mitsui Asset Management in Tokyo. “I’m not so concerned about the trade deficit.”

The trade shortfall was wider than a median forecast of ¥773.5 billion in a Bloomberg News survey of 24 economists. The rise in exports was below a median estimate of a 12.8 percent increase.

The rise in imports exceeded an estimated 16 percent gain and marked the biggest jump since June 2010.

“Imports aren’t rising in terms of quantity, but prices are going up because of energy costs and the weaker yen,” said Minoru Nogimori, an economist at Nomura Securities Co. in Tokyo.

Exports to the U.S. increased 18.4 percent on year, faster than a 14.6 percent rise in June, while exports to the European Union jumped 16.6 percent after an 8.6 increase in June, boosted by products including cars, machinery and steel.

Japan’s growth slowed to an annualized 2.6 percent in the April-June period from 3.8 percent in the prior quarter, less than forecast as capital investment fell for a sixth straight quarter. The economy will shrink an annualized 4.3 percent in the three months after the planned tax increase in April before returning to growth, according to the median estimate of economists surveyed by Bloomberg News.

Abe will make the final decision on the tax after revised second-quarter gross domestic product data are released Sept. 9.

In China, prices of new homes rose in July from a year earlier in 69 of 70 cities, including gains of 17 percent for Guangzhou and 14 percent for Beijing and Shanghai, the National Bureau of Statistics reported Sunday. All three cities had the biggest gains since a change in methodology in January 2011.

The heat in the property market contrasts with an economic slowdown. While policymakers are concerned at housing becoming unaffordable, Nomura Holdings Inc. economist Zhang Zhiwei said Monday that “the government has no choice but to tolerate rising property prices in the short term” amid constraints on growth.

Elsewhere in Asia, Thailand’s economy grew 3.3% in the second quarter from a year ago, a government report will show Monday, according to the median estimate in a survey by Bloomberg News.

  • JS

    The fact is that Japanese exports have remained flat and have not increased over the year in volume terms. The so called increase in Japanese exports is merely related to depreciation of the yen over the last year. There is no economic recovery or boost in exports going on in Japan.

    The yen depreciated 24% yr-over-yr during the comparison period against the USD. So, Japanese companies received 24% more yen when they converted their profits from USD to JPY.

    As the Nikkei newspaper reported on their English website on 2013/08/19, “The weaker yen increases the value of export revenues when they are translated into the yen from the dollar and other foreign units. But in volume terms, Japanese exports have remained stagnant this year, weighed down by a sovereign debt crisis in Europe and an economic slowdown in China.”