While China’s exports continue to grow like topsy there’s good news for Australian exports (especially resource companies) from our largest trading partner, Japan.
Figures out this week not only confirm that it’s enjoying strong growth but that the previously reported figures were understated and have been upgraded.
The economy grew at an annual rate of 5.5 per cent in the December quarter, the best performance in three years.
The Japanese government upgraded its earlier estimates of an annual growth rate of 4.8 per cent in the last three months of 2006.
The economy expanded 1.3 per cent from the September quarter, much faster than the US, Europe and Australia.
That’s good news for our exporters, such as BHP Billiton, Rio and the like. It helps explain why thermal and soft coking coal prices have been settled as surprisingly high levels in the past week: demand is rising and supplies are needed by Japanese consumers who are in competition with buyers elsewhere in Asia.
But the better than expected figures won’t prompt the Bank of Japan to lift interest rates at its two day meeting next week in Tokyo. It took that step a month or so ago and there’s no chance of the bank moving so quickly for a third rate rise in less than a year.
Not when Japanese price inflation has again disappeared and deflation has returned to shops and businesses in some parts of the economy.
The growth is coming primarily from strong business investment and solid exports: consumers are not spending, although a recent report suggested that household spending rose 0.6 per cent year-on-year, the first such rise since the end of 2005.
With consumers restrained, the contribution from business exports and investment can be seen from the composition of the December quarter figures: capital spending rose 3.1 per cent compared to the September quarter compared to a one per cent rise in spending by Japanese consumers.
Producer prices are rising slowly and at the consumer level they are steady to weaker because of the weak consumer demand and the impact of lower energy prices. The so-called core Consumer Price Index (like here and in the US it strips out fuel and food costs) is running at zero and might have gone lower last month when the February CPI is released in about 10 days time.
Japanese exports rose sharply in January, meaning Japan’s trade surplus in January rose by around 50 per cent. This followed an 18.2 per cent rise in exports, led by the reliable trifecta of cars, steel and electronics.
There’s a bit of Australia in at least two of those product areas.
China might be the engine, but it appears the Japanese export machine is showing no signs of relaxing its strong performance of the past couple of years.
With no worries about inflation (but wages are falling and the price deflation seems to be back in places) the Japanese economy seems better placed than it has for a year or more. There are some elections later in the year which could be destabilising.
