The recent spate of positive economic news from China (which is good news for Australia) has drawn attention from Japan’s attempts to reflate itself out of a deflationary rut, and the impact on Australia.
Japan is attempting this by the bold strategy of lifting stimulatory spending, deliberately boosting cost pressures, and weakening the yen to push exports and imports higher.
So far it’s had a generally positive impact and starting yesterday, we are now getting the data for the month of September, the September quarter, the six month period to the end of last month, and the report card for the first nine months of 2013.
Most are expected to be positive and supportive of the attempt by the government and The Bank of Japan to drag the country out of 20 years of being hit by deflation, weak growth, zombie banks, zombie companies and scared consumers.
Yesterday showed the trade account is being battered by soaring imports and not so soaring exports, Friday will see the release of data on inflation; next week data on industrial production, employment and retail sales growth.
And, next week will also see the first estimate of September quarter GDP, and that for the September half year and the first three quarters of 2013 as well.
Because Japan starts its financial year on April 1, the data will tell us how the first half of the 2013-14 year has gone, and how the economy has travelled in the first nine months of calendar 2013 because some of the reflationary moves started late in 2012.
Others kicked off in April when the Bank of Japan revealed plans to increase its quantitative easing spending to record levels over the next two years with the aim of driving inflation higher and economic performance.
For Australia, the economic policy changes in Japan are important news. Coupled with the closure of the country’s 54 nuclear reactors after the earthquake, tsunami and Fukushima nuclear crisis in early 2011, Australian exports are up sharply to Japan.
Japan is our second biggest export market, taking huge amounts of iron ore, coking and thermal coal, LNG and rural commodities (such as wheat and meat).
That has shown up in the trade data for the September quarter and the six months from April 1.
For the six months to September of this year, there’s been a 12% or near $A2 billion surge in exports, thanks to higher shipments of LNG and thermal coal to make up for the loss of power from the closed nuclear power stations.
The Ministry of Finance data showed that Japan had a record 15th straight monthly trade deficit in September, as growth in exports slowed. That’s the longest streak of trade deficits since 1979.
Exports last month rose 11.5% from a year earlier, down from a 14.7% rise in August and missing a market forecast 16.1% increase. Imports rose 16.5%, up from a 16% increase the previous month, as high energy prices continued to take a toll on the Japanese trade account. Some forecasts suggested imports could have risen 20% in September from the same month in 2012.
That gave Japan a September trade deficit at ¥932.2 billion yen ($US9.5 billion), just under August’s ¥960.3 billion. In the April-September fiscal first half of this year, Japan ran a record trade deficit of 4.99 trillion yen (more than $US50 billion).
Credit Suisse said that on an inflation adjusted basis, the trade deficit of 1.091 trillion yen was the largest ever recorded by Japan.
Japanese exports to China rose 11.4%, while those to the US soared by 19%, and European Union-bound shipments jumped 14.3%. But the growth rates were all a touch lower than in August.
Exports to Asia rose a solid 8.2% in September, but were up more than 13% in August.
Despite the trade data, Bank of Japan Governor Haruhiko Kuroda maintained an upbeat assessment of the economy, saying it is recovering moderately and will continue to do so."Japan’s economy is making steady progress toward achieving the BOJ’s 2 percent inflation target," Mr Kuroda said in a speech to a quarterly meeting of the central bank’s branch managers, according to a Reuters report.
In September, exports to Japan rose 22.7%, but imports from Australia were only up 9.4%. In the six months to September 39, exports from Japan to Australia were up 22.3% and imports from Australia were up 12.0%, or nearly $A2 billion.
The trade surplus for Australia in the six months was $18 billion, second only to that with China.
