Japan's Trade Flows Slow

Japan’s trade trends have remained firmly riveted in place with its goods trade position in deficit for 17 months running and its export and import trends in a clear decelerating phase.

Japan is caught between some powerful forces that will remain in play for some time. Its export markets in China and in Europe are weak and economies in those two regions are still under what may be increasing downward pressures. Japan has shuttered its nuclear facilities creating a much stronger need for fuel imports than in the past and its longer run position on the use of nuclear fuel is under scrutiny. The yen has moved up sharply and stayed there curtailing competitiveness; it has stayed (numerically) below an exchange rate to the dollar of 80 for the last 12-months. Japan is still shaking off the Economic impact of its triple disasters of over one year ago. Attempts to rely on outsourced production in Thailand were blunted by severe Thai flooding. Japan has also chosen this moment in time to hike its consumption tax and to try and deal with its problem of having such a huge stock of domestic debt.

Japan’s population is now shrinking instead of growing. So add up these factors and you see some real lasting changes for Japan’s trade flows. These are, for the most part, not temporary factors that will switch around and alleviate the pressure on current trends. Japan is in for a long slog although there are some signs that it may be breaking out of its long struggle with deflation.

The strong yen hurts Japan’s ability to export, but it does soften the blow on the costliness of oil imports. Yr/Yr exports are weaker than imports but imports are starting to turn sharply lower.

Japan Trade Trends   In period level of %change Average in period of %change All Data Yen Basis; Bln Yen Jul-12 Jun-12 May-12 3M prv 6M prv 12M prv 12 mo ago Balance on Goods (326) (318) (619) (474) (478) (399) 135   % M/M %SAAR Exports goods % -1.1% -1.6% -0.9% -12.7% 0.3% -4.8% -1.2% Motor Vehicles -0.6% -13.4% 7.8% -20.9% 3.0% 4.5% -4.0% Import Goods % -0.9% -6.3% 1.4% -27.4% -6.0% -1.2% 13.0% Motor Vehicles 25.6% -18.9% 24.2% 190.2% 62.8% 65.9% -12.6% Prices in %, SAAR 3M 6M 12M 12 mo Ago Memo: Yes/$, AVG, Level 78.93 79.32 79.67 79.31 80.02 78.57 82.34