Japanese exports have been showing growth over where they were last year throughout 2010, on a month-on-month basis, but the rate of increase has been steadily falling over the past nine months. Data that has just emerged for November have reversed this trend, at last. The November figure showed that exports had risen by 9.1% over the level seen in 2009; this compared with a 7.8% increase in comparable figures for October.
Whilst the rising Yen has taken a bit of a respite over the Dollar in recent weeks, it is still worth more than when the Bank of Japan interceded in September (to devalue the Yen), so the idea that these export figures reflect the relaxing Yen is probably questionable. The Bank originally acted for fears that the rising value of the Yen would harm Japan’s exports.
The Bank of Japan decided to keep interest rates on hold at between 0 and 0.1%, so the bank has little room for manoeuvre in that regard. The government approved a further wave of $61 billion in stimulus measures last month. The package was intended to boost the economy and boost jobs, but it is too early to see any effects from it yet. Against this backdrop, the government has slashed its growth projection to 1.5% for next year compared to a predicted growth of 3.1% in 2010. They are also predicting that consumer prices will stop falling in 2011 – they must at some point – Japan has seen 20 consecutive months of deflation.
Japan surprised economists by returning annualised growth figures of 4.5% for Q3. However, most analysts are expecting that Q4 figures will be very much weaker as the longer term effect of the high Yen bites and the transient factors that helped Q3 performance are removed from the equation.