Japan's December exports rose year-on-year for the first time in 15 months, helped by brisk demand from Asia, especially China, which has become the top overseas market for Japanese goods. However, the rising yen and a growing reliance on the Chinese market may bode ill as Beijing looks to tighten monetary policy.
Exports jumped 12.1 per cent from a year earlier to ¥5.4 trillion (Dh221.17 billion) in the month, the finance ministry said yesterday. Asia-bound exports, which account for more than 50 per cent of Japan's total shipments, surged 31.2 per cent to ¥3tn, the ministry said. Japan's exports to China soared 42.8 per cent to ¥1.1tn on brisk sales of cars, plastics and organic chemicals. "As Chinese authorities are trying to rein in overheating in the economy, export growth will probably slow down a bit," said Hiroshi Watanabe, a senior economist at Daiwa Institute of Research.
Still, Japan's export strength - the benefits of which have had little impact on households or the domestic sector - looks likely to keep the economy on the path to recovery for now. "Japan's economic growth is likely to accelerate towards the end of this year, reducing the possibility of the BoJ [Bank of Japan] taking further easing measures," said Kyohei Morita, the chief Japan economist at Barclays Capital.
"But given that the yen is likely to appreciate again on such factors as China's possible tightening, the BoJ may be prompted to take steps to respond to market volatility." China replaced the US as Japan's biggest export destination for the first time last year, finance ministry data showed. But financial markets have been worried that growth in Chinese demand could slow as Chinese authorities start tightening restrictions on loans and liquidity to stave off inflation.
A resurgent yen also poses a vexing problem for the country's exporters. A strong yen reduces their international competitiveness and erodes the value of overseas earnings. The yen hit a six-week high of about ¥89.35 to the dollar yesterday, getting closer to the 14-year high of less than ¥85 per dollar that was reached in November. Economists said that the headline figure suggested exports grew solidly from November and that shipments of machines, which had been slow to recover, were picking up.
Exports to the EU also posted their first annual rise in 17 months. In contrast, shipments to the US fell 7.6 per cent, a sign that improvements in the global economy remained uneven. "Most countries around the world are seeing their economies recover, but improvements in advanced economies remain fragile," said Takeshi Minami, the chief economist at Norinchukin Research Institute. "We can't rely too much on strong growth in those countries, so Japanese exports will continue to focus on shipments to Asia."
Imports last month fell 5.5 per cent to ¥4.9tn, leading to a trade surplus of ¥545.3bn, the ministry said. For all of last year, exports tumbled 33 per cent to ¥54.18tn, while imports plunged 35 per cent to ¥51.37tn, the ministry said. The BoJ on Tuesday cited Asia's rapid growth in narrowing its forecast for economic contraction this year. It now projects GDP to fall 2.5 per cent this fiscal year to the end of March, better than its previous prediction of a 3.2 per cent decline.
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