Japan continues recovery as exports pick up

| November 25, 2009 | 0 Comments

The Japanese economy cemented its recovery today after it emerged that exports totalled 5.3 trillion yen in October - a fall of 23.2% compared with the same month a year go.

The Japanese economy, which is the world’s second largest, is heavily dependent on exports and suffered its worst recession in decades as it was hit by a slump in demand for its products overseas, particularly cars and electrical goods.

However, the fall in exports was the slowest rate in a year, providing further evidence of the economy’s exit from recession.

Adrian Foster at Rabobank comments: “Japan is clearly participating in the global rebound, and its Asian neighbours in particular are lending a helping hand.”

Yoshiki Shinke, a senior economist at Dai-Ichi Life Research Institute, adds: “Japanese domestic demand is still weak. It’s unlikely we’ll see a robust recovery in Japan. But we should see a gradual recovery led by exports.”

However, domestic demand for goods made outside Japan remained poor, falling by 35.6% during the month, resulting in an overall trade surplus of 807 billion yen - however, a strong rebound from a deficit of 75 billion yen this time last year.

In related news, last week, Naoto Kan, Japan’s deputy prime minister, acknowledged that deflation has returned to the Japanese economy for the first time since 2006.

The Cabinet Office said in a statement that “Japan is in a mild deflationary situation”.

A short period of deflation (where prices fall rather than increase) could be a serious threat to the economy because it deters consumers and businesses from spending in expectation of falling prices.

Deflation was a problem for Japan during its so-called “Lost Decade” in the 1990s.

The Cabinet Office acknowledged that falling prices could hurt the recovery of the economy.

Finance Minister Hirohisa Fujii expressed his concern and said: “The recent price falls are not right, and worrisome.

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