Good news (relatively speaking) from Japan: the country’s export drought seems to be slowly repairing itself: with slowly the operative word.
Thanks to China’s book (in part) and stronger demand from some other trading partners, the plunge in exports is easing.
And that influence from China was also reflected in an upbeat outlook for Asia from the Asian Development Bank, which was released yesterday (see below).
Although the news from Japan focused on the improvement in the trade surplus (which jumped nearly five-fold) in June from June 2008, the real story was the small improvement in exports with the best performance this year being recorded in shipments to China and Europe.
Many reports didn’t realise that it was the bigger than expected fall in imports that helped boost the trade surplus.
The rise in the trade surplus was the first in 20 months, but that was as much to do with the sharp fall in the price of coal, iron ore and oil imports from a year earlier, than any significant upturn in export income.
The high yen is still crimping export returns for Japanese companies, large and small.
According to the Japanese Finance Ministry, June’s surplus was 508.0 billion yen ($US5.4 billion) compared with a year-before surplus of 104.1 billion yen.
Markets had expected a bigger surplus of 593 billion yen.
Exports fell 35.7% (41% in May) to 4.6 trillion yen while imports dived 41.9% (42.4% in May) to 4.1 trillion yen.
Demand picked up in all regions. Exports to China were down 23.7% last month from June 2008, the smallest fall since October. Exports to the US fell 37.6%, the least since December, and sales to Europe slid 41.4%, also the best this year.
Japan posted a trade surplus of 3.9 billion yen with China, the first in four months, while the surplus with the US fell 37.1% to 277.6 billion yen to mark a year-on-year drop for the 22nd straight month.
The surplus with the European Union dived 71.6% to 90.5 billion yen for the 10th consecutive month of declines.
The economy shrank at an annualised pace of 14.2% in the first quarter of 2009, the worst performance on record, but recent data have indicated that exports and industrial production have begun to rebound.
Exports to Australia from Japan fell 40%, while imports were off more than 51% on the back of the lower prices for LNG, coal and iron ore.
Exports to Russia fell 83%, imports were down 55%.
The International Monetary Fund said this month the global economic rebound next year will be stronger than it predicted in April, raising its forecast for world growth to 2.5% for 2010 from an April estimate of 1.9%.
This news follows the upturn in China in the second quarter, with growth hitting an annual rate of 7.9%. Singapore has revised up its forecast for the rest of the year, as has South Korea. South Korea’s second quarter growth figures are due for release later today.
The Asian Development
Bank released an upbeat report on the region’s emerging economies yesterday, predicting growth in 2010 would be double that of 2009.
However, the bank warned there were risks to recovery, including over-enthusiastic regulation of the financial sector.
The bank’s semi-annual Asia Economic Monitor estimated that aggregate gross domestic product growth of the grouping – which includes the 10 members of the Association of South East Asian Nations, China, Hong Kong, Taiwan, and South Korea – would rise from 3% this year to 6% in 2010.
With global trade expected to shrink 12.4% in 2009, Asia’s emerging markets, and particularly the heavily export-dependent economies of Hong Kong, Korea, Singapore and Taiwan, have been hit hard.
But as we have reported, South Korea and Singapore seem to be on the improve, and some economists say that Taiwan is on the turn as well, as the relationship with the mainland grows.
In backing its case that Asia had reached the bottom of the recession, the bank cited the strengthening of many of the region’s currencies, the 68% increase in the regional stock index, and growing bond yields.
Although the bank expected Asia’s emerging economies as a whole to grow by 3%, that figure masked wide variations between countries.
China, which grew 9% last year, is expected to grow 7% this year and 8% in 2010. The IMF and World Bank all estimate China’s 2009 growth will be above 7.5% and China reckons (according to ‘officials’) that its growth will be running at an annual rate of 9% or better by the end of the year.
There were also wide variations between Asean nations – Vietnam was expected to grow 4.5% and Indonesia by 3.65, but Thailand was expected to contract by 2% as the downturn in car exports (and parts) hurts and tourism is impacted by the unrest earlier in the year.
In the first quarter of 2009, aggregate GDP growth of major emerging East Asian economies declined to 1.2% year-on-year, down from 2.6% in the last quarter of 2008 and in sharp contrast to the 8.5% growth in the first quarter of last year.
But the ADB said that despite the global recession, most of the region’s economies have performed better during the current economic crisis than during the 1997-98 Asian financial crisis.
Early figures for the second quarter in the region suggest that the slowdown may have bottomed out: China’s
