On the face of it, news that Japan reported a rise in exports last month, compared with December 2008, seems to be good news.
Coming amid indifferent figures for industrial production inflation (deflation really), unemployment and retail sales, news of the first real rise in exports for more than a year should have been seen as unambiguous good news.
For Australia, its an important situation. Japan is still our second biggest export market.
While iron ore and coking coal shipments are rising, exports of other products are weak. Demand is weak in Japan.
As we saw with retail sales in December which fell 1.2% in something of a surprise.
They had been expected to edge higher after a 1.1% decline in November.
It’s a sign of the continuing level of unease now gripping Japan.
.Some of its biggest corporate names are coming under pressure.
JAL, the once government-owned airline, has gone bust, mighty Toyota, perhaps the most admired company in the country, is mired in a series of quality problems that could cost it billions of dollars and an enormous loss of prestige.
And the newish Democratic Party of Japan Government is proving to be a disappointment, in some ways just as disappointing as the old LDP administration.
Exports are the country’s lifeblood, so December’s improvement should be seen as a small positive.
But as is now usual with Japan, the improvement wasn’t good enough to proclaim slump over, or to say slump continues.
Like so many things in Japan at the moment, the country’s economic and political situation is stranded in a rut that seems to growing deeper.
The government is drifting, with a potential political scandal gradually taking shape against one of its most powerful backroom figures.
There’s a new finance minister after the original appointee quit because of poor health.
The new one doesn’t have the political or economic skills to cut spending and reassure markets.
It’s one of the reasons why S&P put the country’s international rating on a negative creditwatch.
But the 12.1% rise in exports in the month of December was the first rise for 15 months, since Lehman Brothers collapsed in September of 2008.
In racking up the rise, Japan reported its 11th consecutive monthly trade surplus, with December’s surplus hitting Y545.3 billion (or around $A6.7 billion),
That reversed the year-before deficit of Y322.2 billion (or $A4.0 billion).
So the "good news" for exports should be seen with this in mind and should also be viewed on a realistic comparative basis.
December 2008 was a miserable year, with Japan reporting its largest every monthly slump in exports up to that time: 35%.
That means the rise in December 2009 was from a lower base and in reality means that exports remain well below where they were in December 2007.
It is the 11th consecutive month that Japan has posted a trade surplus, according to data from the finance ministry.
But despite this, the 12.1% rise should be seen for what it is: modest good news because it was well above market estimate for a 7%-8% rise and it reversed the 6.3% fall in November.
Exports rose a seasonally adjusted 2.5% in December from November.
Imports fell 5.5% in December from December 2008, perhaps a better reflection of the continuing sluggishness in the wider Japanese economy because imports in December 2008 plunged 21.5% from December 2008.
Now currency and commodity price changes would have some impact here, deflation is a problem in Japan and the higher yen and lower prices for some commodities have forced imports lower.
But Japan’s great industrial strength is importing resources at low prices and exporting higher valued goods, and that it has been unable to boost imports over the past year, tells us that the economy remains moribund.
Only industries servicing China (steel, cars, electronics and consumer goods) seem to be doing better.
Demand from Asia led the resurgence in trade.
Exports to Asia jumped 31.2% from a year earlier, the fastest rate since early 2000.
Exports to China climbed 42.8%, the largest increase in almost three years, led by record demand for automobiles.
Exports to the US fell 7.6%, while shipments to Europe rose 1.4%, the first rise in 17 months.
In December 2008, exports to the US fell a record 36.9%, after declining 33.8% in November of that year.
Exports to Asia were down 36.4%, so the rebound since then to this region has been impressive.
The improvement in exports however is no pointer for the wider economy.
Steel output jumped by 51% in the December quarter and is expected to continue at a similar rate this quarter.
But that’s because of higher demand for cars from China and for steel products from Chinese buyers, not from Japanese industry.
Machinery orders fell to a record low in November as companies remain reluctant to increase capital spending, and household sentiment fell to a six-month low in December.
Bank of Japan Governor Masaaki Shirakawa warned Tuesday the economy is likely to lose momentum as global stimulus spending fades. The central bank left interest rates unchanged at 0.1%.
Over 2009 exports fell 33%, the biggest fall since comparable figures were started in 1979.
China surpassed the US as Japan’s largest export market for the first time on an annual basis.
That won’t change.
Sometime in the next year China will replace Japan as the world’s second biggest economy after the US.
China’s credit rat
