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| Japan Economy – May 2012 |
| Tokio, 30.05.2012 |
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| The Japanese economy continues to recover, with both exports and domestic demand posting solid growth rates. This momentum is fuelled by slightly improving external trade activity compared with the end of last year — and local stimulus efforts that are lifting domestic demand. Growth activity, however, is still relatively low and the negative effects of last year’s triple-disaster continue to be felt. In particular, decisionmaking with respect to the supply of nuclear energy will be of importance. Currently, there is no nuclear reactor online, and it is expected that the effects of this will be felt in the energy-intensive summer season. Power-cuts would be possible, with a negative impact on industrial production. Furthermore, the unusual situation of a trade deficitmight have an effect on the country’s economic structure.
Exports have posted the first expansion on a yearly basis since last September, increasing by 5.9% y-o-y. This growth is due to the very low base level from last year. However, exports also rose on a monthly basis, by 14.1% m-o-m in March and by 20.6% in February, which indicates that, although the momentum has slowed, expansion remains at high levels, and, with the current improvements in global trade and manufacturing, this is expected to continue. This trend is supported mainly by industrial supplies, which grew in February and March by 14.8% and 18.8% m-o-m respectively, and by capital equipment, which grew in February and March by 20.8% and 17.5% respectively. Both categories are the most important areas for exported goods.
On a yearly basis, imports grew more than exports in March, when they expanded by 13.1% y-o-y, moving the trade deficit to 520.7 billion yen on a seasonally adjusted basis, the lowest level for six months. This was also due to the rising value of the yen. However, it remains to be seen how this situation will develop, as it will depend on the future development of the yen and the decisions that will be made on the nuclear energy sector. The domestic side of the economy continued to improve, with the retail trade increasing by 10.3% y-o-y in March, again a significant low base effect, but also a solid gain from the previous month of 15.5% m-o-m, to support this trend. Motor vehicle sales were strong at 50.4% y-o-y and highlighted the success of the current stimulus. The most recent household survey showed a 3.4% yearly increase in household spending, which was a slight decline on a monthly basis of 0.5%, when excluding highly volatile items.
With the stimulus continuing, the domestic side is expected to improve further in the coming weeks. This should be supported by the low unemployment rate of 4.5% in March. The so-called job-openings ratio improved very slowly, by 0.01 points from last month, and now stands at a factor of 0.76. The number of job-openings continued to increase, rising by 1.7% m-o-m. This slow momentum of improvements in the labour market is expected to continue. The uncertainty about production, due to power shortages in the summer time and the dependence of the economy on a continuation of the recovery in international trade, and the stimulus to support domestic demand should both dampen major hiring increases.
However, an improvement in output can be observed in industrial production and in leading indicators for the coming weeks. Industrial production increased by 15.5% y-o-y in March, a monthly rise of 1.0%. Machinery orders point to a continuation of the current expansion. Excluding volatile items, they increased by 4.8% in February, after 3.4% in January. The expectation of economic growth in the near future is also reflected in the purchase managers index (PMI) provided by Markit. While, for the manufacturing sector, it declined slightly from 51.1 in March to 50.7 in April, it was still above the 50-level, which indicates expansion. The same applies for the services sector, which at 51.0 was above the 50 level, although it had fallen from \ 53.7. These output-related indicators point to an expanding economy, which still seems to be fragile and dependent on supportive factors, such as international trade further picking up and local stimulus measures.
Japan’s economy is still in relatively weak, and, while it is expected to expand, one has to consider the base effect from last year. After last year’s decline of 0.7%, the absolute GDP level was comparable with the levels of 2006. Taking all the above into consideration, the forecast remains unchanged at 1.8% for the current year, and additional signs of improvement will be needed for any further upward revision.
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Address : Euro-Brew Ltd., Hlboká 22, 917 01 Trnava, Slovakia
Tel. : +421 33 53 418 53, Fax : +421 33 53 418 52, E-mail : info@eurobrew.sk |
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