Japan: Exports Decline Less then Expected, Imports the Real Problem

Econintersect:  Japanese exports declined by by 1.3% year-over-year in August and that was the good news.  For one thing it was good news because Bloomberg surveyed 25 economists who provided an average estimate of -2.6%, double the actual.  It was also good news relative to imports which continued to be weak, falling from August 2013 by 1.5%.  The falling imports reflect the lack of domestic demand following the 60% increase (from 5% to 8%) for the country’s consumption tax on 01 April.  This affected every level of the economy since it is a form of value added tax.

Even though exports were stronger than expected they are still declining year-over-year which is not what Japan had hoped for with the weakening of the yen, down 4% against the U.S. dollar from August 2013 to August 2014.  That the lower exports have occurred in spite of the favorable currency is a reflection of a weakening global economy.

Most puzzling is that exports to the U.S. declined which is difficult to explain since the U.S. is supposed to be in a recovery.

The Japanese export story cannot be defined by the August results after June and July had shown growth.  This fluctuating data set must have multiple months to determine actual trends.  Likewise more data is needed for exports to the U.S. before jumping to any conclusions.

John Lounsbury

Sources:

• Japan Exports Fall Less Than Forecast With Recovery Weak (Masaaki Iwamoto, Bloomberg)

• Japan exports knocked by weak U.S. shipments, hurt economic recovery (Stanley White, Reuters)