Japanese Exports and US Economy

http://www.bloomberg.com/news/print/2015-01-25/japan-exports-rise-more-than-forecast-paring-record-deficit.html


Recent news indicates that Japanese exports increased 12.9 percent from a year earlier. Much of this can be attributed to a rise in demand in the US economy as consumers become more confident. This might sound like good news for Japanese exporters, and of course the help of the weakening yen against the US dollar, but how times before have we seen where Japanese exporters become too much the focus on improvements in the Japanese economy.

While its good news, any good news is welcome and encouraging, how much of a benefit will the rest of the Japanese economy get from an increase in exports? Exports is just one part of the GDP equation as consumption and government spending also play a large part. Fiscal and monetary actions are attempting to due their part of the real problem in GDP potential, but the real problem of course is domestic demand and consumption. No large/modern economy can exist on exports alone. Another possible recession in the US would possibly swing Japanese exports back into the abyss, with no help from the EU at the moment. There is no indication of a US recession of course, quite the opposite, but the point is the main challenge of Japan and its government is finding a way to get the real GDP up to potential GDP, and it seems the only way to do that is to stimulate demand in the domestic economy.

Also the Chinese economy has been slowing after three decades of recovery. So an export country, such as Japan, only relying on the US for export growth is not going to bring about a full recovery of the Japanese economy. The EU also has its own consumption problems.

Japan is still running a trade deficit after years of a surplus. The lower oil prices have helped and the weakening yen has been good for exports and of course not so good for importers, with the BOJ'S goal of inflation targeting now reduced to a !% goal.

Many pieces to the puzzle to get real GDP up to the potential GDP for Japan has been the challenge the last 20 or so years.

© 2015 Tom Metts,  all rights reserved