Amid reports of yet more stimulus spending in Japan, the country has seen a sharp fall in its trade surplus for August, the first fall for 15 months.
Thanks to higher imports of crude oil, iron ore and liquid natural gas, the surplus shrank by more than 37% to just over $US1.2 billion (103.2 billion yen).
The figure was significantly lower than market forecasts for a surplus of 200 billion yen and the 165.2 billion yen surplus recorded in August of last year.
Exports rose 15.8% to 5.22 trillion yen year-on-year while imports rose 17.9% to 5.12 trillion yen.
Higher imports of crude oil, liquid natural gas as well as iron ore cut the trade surplus despite the rise in exports due to strong demand for automobiles and steel products.
The reports of the new stimulus plans put the sum to be outlaid at $US55 billion.
But coming on top of the money spent trying to force down the value of the yen two weeks ago and the cheap loans program from the central bank (and around $US10 billion in new spending committed to last week), the amount of stimulus could easily top the $US100 billion level.
Nothing appears to have been decided one way or the other, but the fact that the reports have surfaced tells us the Democratic Party Government is moving towards some sort of new spending plan, one which has been advocated by opposition parties.
Media reports claim the spending will be aimed at combating the impact of the strong yen.
The government intervened and sold yen nearly two weeks ago and more intervention was threatened (but has yet to happen). Since then the yen has recovered to just over 84 to the US dollar: the intervention happened at just over 82 yen.
The reports support concerns that the leadership of Japan remains weak and uncertain after the win by Prime Minister Kan over his challenger, Ichiro Ozawa.
Mr Kan is a fiscal hawk who has warned that Japan could become the next Greece.
For that reason he has been slow to adopt big, new stimulus measures for fear of pushing the nation further into debt.
The opposition Liberal Democratic party and the New Komeito party have been calling for new spending schemes totalling between 4,000 billion and 5,000 billion yen ($US47-$US59 billion).
The government agreed last week to an emergency 918 billion of stimulus spending that would create a claimed 200,000 jobs and boosting real gross domestic product by 0.3%.
That has been attacked by industry and opposition as being too little.
The government has now briefed the media with suggestions that it might be able to find another 4,000 billion yen in new spending, without adding to debt, because of higher than expected tax revenues, unused funds from the 2009 budget and unused amounts from lower than forecast interest payments on government debt.
Tokyo reports yesterday said the Prime Minister was due to talk to his party last night about a spending plan to be sent to Parliament on Friday.
This spending would add to the tens of billions of dollars in cheap loans the Bank of Japan has committed itself to twice this year in attempts to stimulate the economy.
On top of that the $US20 billion or so claimed to have been spent intervening against the yen will be ‘unsterilised’ in that the central bank will not sell bonds to banks to take back the money spent.
It will be allowed to enter the economy in a form of quantitative easing.
