By: DailyForex.com
Figures just released show that Japan’s exports to the rest of the world have fallen for a fifth consecutive month. The Japanese economy continues to suffer from deflation which stifles domestic consumption since consumers put off major purchases for as long as possible so as to benefit from falling prices.
Exports were down by 6.5% in October on a year-by-year basis, reflecting the continuing influence of weakening global demand as the recovery stutters and, in some areas, reverses. The exports to China fell by 11.6% (this data should not have been influenced by current territorial tensions over the sovereignty of some islands in the East China Sea) and by 20% to the EU. The EU data reflects the effects of uncertainties because of the European sovereign debt crisis and concerns that Greece may be forced to leave the Euro. These factors have driven the Euro lower against the Yen, making Japanese exports to Europe more costly, an effect worsened by weak demand in Europe as a consequence of the global slowdown and austerity measures in place in many EU countries.
Now What?
The figures fuel heightened concern that the Japanese economy which contracted in the last quarter will fall into recession. Further uncertainty is also being contributed because of the snap general election which was called last week and may see a change of government take place.
The Japanese may be getting some good news in the shape of a softening of the Yen against other major currencies. Despite the odd blip, the Yen has been falling against the US Dollar since October (the early November rally may have been due to US Presidential election jitters). It has softened from 78.12 (Oct 10) to 82.72 (currently) and the trend looks set to continue. Partially, this may be due to optimism that a negotiated solution may be found in the US to prevent them from the evils of the “fiscal cliff” which they are set to fall over on New Year ’s Day if common ground can’t be found between Republicans and Democrats.