Those who think a collapsing currency is a sure-fire way to increase exports need to rethink their beliefs.
Despite a falling Yen, Japan Posts Largest-Ever Trade Deficit.
The gap between the value of Japan’s exports and that of its imports grew by more than two-thirds in the 12 months through March, to Y13.7tn ($134bn), according to government data released on Monday. It was the third consecutive fiscal year of deficits, the longest streak since comparable records began in the 1970s.
Toyota, Hitachi and other large Japanese companies have enjoyed soaring profits as a result of the weaker yen, which has fallen by a fifth against other major currencies since November 2012.
But the improvement has come less from increased exports than from flattered exchange rates on overseas sales. Japanese export volumes have barely risen and the yen value of goods shipped to foreign markets has increased much more slowly than the value of imports.
Exports actually declined slightly by volume in January-March compared with the previous quarter, by 0.2 per cent on a seasonally adjusted basis, according to calculations by Credit Suisse, even as imports grew by 4.5 per cent.
A steady outflow of Japanese manufacturing jobs to lower-cost countries and declining competitiveness in some sectors, such as consumer electronics, has limited the power of a cheap yen to lift exports.
Overall Japanese exports increased 0.6 per cent by volume last fiscal year, Monday’s data showed, leading to a 10.8 per cent rise by value in light of the weaker yen. Imports rose 2.4 per cent by volume and 17.3 per cent by value.
Japan has 50 nuclear reactors. Every one of them is offline. Abe wants to bring them back online, but the Financial Times reports “analysts think that at most 12-15 of the reactors will ultimately be restarted.”
A falling Yen and rising energy imports, coupled with a slowdown in China and tax hikes in Japan suggest Abenomics is going to be a dismal failure unless the goal is to goose stock prices rather than goose the economy.
Mike “Mish” Shedlock