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Economy in Brief

No Clear Direction for the Japanese Economy in RecentĀ  Statistics
by Louise Curley January 30, 2007

The economic news out of Japan is ambiguous. Production and exports are strong, employment, retail sales and family living expenditures are weak. The yen has depreciated sharply in recent weeks against the euro and the dollar. The yen is, currently, at its lowest point against the Euro since the introduction of the Euro in 1999.

Japanese industrial production made a new record in December, 2006 at 109.5 (2000=100), exceeding previous peak levels reached in 1991, 1997 and 2000 as can be seen in the first chart.

The strength in the production sector has not come from domestic consumer demand but, rather, from export demand. The second chart compares the index of retail trade and the value index of exports, both with a base of (2000=100). The index of retail sales was 92.0 in December, down from 92.2 in November and from 92,7 in December, 2005, while the value index of exports was 161.79 up 5.0% from November and 9.84% from December, 2005. Expenditures

Part of the sluggishness in retail trade is due to the relatively slow growth in employment. The third chart compares retail sales with total employment. There is a good correlation between the two series--.92. Although employment in December was 0.7% above the year ago figure it was 0.5% below November, 2006. Moreover, the unemployment rate rose by one percentage point to 4.1% in December.

Depreciations of the yen against the Euro and the U.S. dollar have stimulated the demand for exports. The very rapid depreciation of the yen in recent weeks is shown in the fourth chart.

  Dec  06 Nov 06 Dec 05 M/M % Y/Y% 2006 2005 2004
Industrial Production (2000=100) 109.5 108.7 104.9 0.74 4.39 105.9 101.6 100.0
Exports 161.7 154.0 147.21 5.00 9.84 145.70 127.10 118.42
Retail Trade 92.0 92.2 92.7 -0.22 -0.76 93.1 93.0 91.7
Family Living Expenditures 92.8 93.8 94.0 -1.01 -1.31 93.0 94.8 95.6
Employment (millions) 63.83 64.15 63.41 -0.50 0.66 63.83 63.57 63.29
Unemployment Rate (%) 4.1 4.0 4.4 0.1 -0.3 4.1 4.4 4.7
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