Even though the Japanese economy is not as stricken as it was in the first quarter, signs continue that it is not out of the woods by a long way.
Exports are still down by more than a third over the past year, business investment is falling and lending by banks hit its lowest level in 11 months in August.
Japan’s current account surplus fell nearly 20% in July from the same month in 2008 as exports eased, imports rose and financial income fell by almost a quarter.
Figures from the Japanese Ministry of Finance show that the surplus fell to 126 trillion yen, or $A15.8 billion.
The figures show that the fall in July followed June’s surprise rise, the first in 16 months.
The trade surplus jumped sharply, but the services account deficit widened and the income account’s surplus fell.
The trade surplus was up 42.3% from a year earlier to Y437.3 billion ($A5.48 billion). Exports fell 37.6% from July 2008, to 4.55 trillion yen ($A57.03 billion) and imports dropped 41.2% to 4.11 trillion ($A51.52 billion).
The deficit in the services account jumped 28.9% to Y288.3 billion or $A3.61 billion and the surplus on income was off 24.2% to Y1.25 trillion ($A15.67 billion), with securities income squeezed by ultra-low interest rates abroad, especially in the US and Europe where official and market rates are at or near record lows. (And Australia as well.)
August’s trade figures, due out later this month, are likely to be impacted by the 5% rise in the value of the yen in the month.
In fact the hesitant Japanese recovery is showing signs of losing steam. Industrial production rose at the slowest pace in four months in July, the unemployment hit a record high of 5.7%, household spending fell and retail sales eased and wages tumbled.
Demand for loans remains low with the Bank of Japan reporting a rise of just 1.9% in August, the slowest rate of growth for almost a year.
That’s being driven by the continuing gloom in business where the two engines of demand, investment and exports, continue to weaken.
Exports are still down more than 37% on a year ago and Japanese companies hacked into investment spending in the June quarter.
In fact the cut in spending was the 9th quarter in a row that investment has fallen.
Figures released by the Financial Ministry show that capital spending (excluding software) fell 22.2% in the June quarter, after dropping a record 25.4% in the March quarter in the depths of the slump.
Profits fell more than 50% in the quarter.
The government will use the report to revise its estimate for second quarter economic growth that’s due on Friday.
The first reading of June quarter GDP showed a 0.9% quarter on quarter rise on March and an annualised 3.7% rate.
Preliminary figures showed the world’s second-largest economy grew an annualized 3.7% in the three months ended June, the first expansion in five quarters.
The Finance Ministry also said this week that the country’s foreign exchange reserves grew by $US19.6 billion last month from July.
They ended at a new high of $US1.042.34 trillion.
A rise in its holdings of special drawing rights at the International Monetary Fund (IMF) was a key factor behind the hike in the nation’s foreign reserves, according to the ministry.
Japan’s foreign exchange reserves are the world’s second largest after China which has roughly double the amount that Japan had last month.
