Sunday, July 25, 2010

Japanese Exports Halfway There

Bloomberg details:

Japan’s exports rose faster than economists estimated, sustaining a boost to the economic recovery that may diminish as the yen strengthens.

Shipments abroad advanced 27.7 percent in June from a year earlier, the Finance Ministry said today in Tokyo. The median estimate of 19 economists surveyed by Bloomberg was for 23.5 percent. From a month earlier, exports fell 1.8 percent.
An increase shows that the global economy continues to recover, but (as always) the increase needs to be put in perspective. Current export levels are still only about halfway back to the level seen prior to the global economic crisis.

The question is what happens going forward? Bloomberg details that following a strong rally in the yen in recent months, officials are concerned:
Japan’s currency climbed to a seven-month high against the dollar this month, prompting officials including Trade Minister Masayuki Naoshima to warn that its appreciation may hurt the recovery. The higher local currency threatens to erode the value of earnings of exporters such as Toyota Motor Corp.

“The yen has appreciated too much,” Koji Miyahara, chairman of shipping company Nippon Yusen K.K., said last week. “I’m hoping the yen will depreciate to a range of 95 to 100 to the dollar as soon as possible.”
Currency can do wonders on a relative basis, but not when every nation intends to follow the same path. And this points to what I view as a huge problem... China, broader Europe, Japan, and the U.S. (to name a few) view exports as the key for future growth and a weaker relative currency as a huge driver of those exports.

But one nations increase in net exports (by simple math) is another nations net import. So... which nation will take all of these exports? I personally don't see many takers.

Source: Customs.GO


  1. It was more than halfway in April at the peak of the market... Now we have austerity yippee.

  2. Besides currency effects, austerity (as broc says) and, more immediately, current account effects, are reasons to be pessimistic.

    Michael Pettis pointed out that the slowdown in financial inflows in southern Europe in May would likely cause a corresponding drop in imports, affecting exporters. And in fact it looks as if Japan's exports to western Europe may have peaked in April.

    It is too soon to call a trend, but from a longer term graph, it looks as if Japan's exports might be leveling out at the halfway-recovered mark.