Just consider how eurozone exports grew from to the first quarter of , a period in which the euro appreciated significantly against the dollar. Remember that between and , the United States was in the process of executing QE programs which weakened the dollar against the euro and other important currencies. The same is true for Japan, as seen in the graphs below. Except for a period between the end of and , when the global economic crisis was felt in Japan, exports remained at relatively strong levels between and The increased pace of exports between and may be attributed to the economic boom prior to the crisis of and not to the yen exchange rate, which was at levels similar to the current one.
A deeper dive into the growth data reveals that currency depreciation may not be having the desired effect on the Japanese economy. Conventional wisdom tells us that a weak yen makes Japanese exports more competitive, and by this logic, exports should have risen markedly since the third quarter of To be sure, the data confirms that on an absolute basis, exports have risen significantly since the latter half of However, it is also important to remember the other side of currency depreciation when considering its impact on the Japanese economy.
While exports have risen markedly since the currency began to depreciate, the rise in import levels has overwhelmed the gains made on the export front. The nuclear reactor shutdown and its impact on the trade accounts has understandably become a point of serious contention in Japanese political discourse. The government has recently moved to outline a resumption of nuclear generation, with four reactors expected to come back online in the next few months. While economic growth in Japan has slowed and is likely to be negatively impacted by the coming value-added tax VAT hike, we believe that opportunities still exist in the Japanese equity market.
To this end, we are focused on identifying world-class companies that sell their products into markets outside of Japan. While a resumption of nuclear power generation may have a positive impact on the trade accounts, GDP growth, and therefore the yen, we believe that the loose monetary and fiscal policies being pursued today by Abe and the Bank of Japan are likely to continue throughout and into That said, on an annual basis, the Japanese yen still gained 2.
This situation contrasts with the dynamics observed earlier this year, where rising risk aversion due to an uncertain global outlook had led the yen to strengthen to a nearly three-year high. FocusEconomics Consensus Forecast panelists expect the yen to trade at For , the panel projects that the yen will weaken to Click on the button below to get started. Sign Up. Read more. Core consumer prices—which exclude fresh food—increased 0.
Yen-denominated merchandise exports rose Core machinery orders—which cover the private sector, exclude volatile orders and are a leading indicator for capital spending over the coming three-to-six-month period—declined 2.
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