Japan’s Export Volume Rises at Fastest Pace in Nearly Two Years

20-Dec-2016 Intellasia | WSJ | 6:00 AM Print This Post

Move signals world’s third-largest economy is on steady growth track

Japan’s export volume rose at the fastest pace in nearly two years in November, boosted by demand from China, signaling that the world’s third-largest economy is on a steady growth track.

After suffering two years of choppy expansion that undercut prime minister Shinzo Abe’s ambitions to revive the economy, figures this year suggest Japan is on a more solid footing. The economy expanded modestly in each of the first three quarters of 2016, and economists expect something similar in the fourth quarter.

Exports, which traditionally drive Japan’s industrial growth, have turned from a drag to a tailwind recently, thanks to factors such as growing demand for Japanese parts from Chinese smartphone makers.

Japan’s exports to China increased 4.4 percent from a year earlier to JPY 1.1 trillion ($9.3 billion) during November, the first rise in value terms since February. Semiconductor maker Toshiba Corp.’s stock price has jumped 38 percent since the beginning of October.

Overall, export volume rose 7.4 percent in November from a year earlier, driven by demand for semiconductors, ships and car parts, the Ministry of Finance said on Monday.

The figures add to the likelihood that the Bank of Japan will raise its assessment of Japan’s economy, including export demand, when the central bank concludes its regular two-day policy meeting on Tuesday.

SMBC Nikko Securities economist Junichi Makino said there was even a small chance that the Bank of Japan would tighten monetary policy by raising its target for the interest rate on 10-year government bonds. The target currently stands at zero.

While Makino said he still expected the BOJ to stand pat, and other economists dismissed the chance of a rate increase, the discussion shows how the debate has shifted. Until recently, each BOJ meeting was preceded by speculation of possible new easing steps to jolt the lackluster economy.

Since Donald Trump’s victory in the US presidential election, the yen has fallen sharply and stock prices have moved to a high for the year. A weaker yen makes Japanese exporters more competitive and makes the country a more attractive destination for tourists, which bodes well for the economy in 2017.

Still, economists said Japan was vulnerable to any unexpected shifts in Trump’s policies. He has criticised China for what he described as that nation’s currency manipulation and might take a dim view of the yen’s recent fall, said another SMBC Nikko Securities economist, Yoshimasa Maruyama.

“A further appreciation in the dollar wouldn’t sit well with President-elect Trump’s intentions,” Maruyama said. “It’s possible that he will try to correct the dollar’s strength through verbal intervention.”

Trump said during the campaign that Japan was taking advantage of the US by exporting many cars. According to Monday’s data, Japan exported 180,919 vehicles to the US in November, up 26 percent from the year-earlier figure. Meanwhile, Japan’s imports fell nearly 9 percent in November, the 23rd consecutive month of contraction.

Another risk is a sudden downturn in China, where government efforts to restrain credit growth have triggered market volatility.



Category: Japan

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