http://www.bbc.co.uk/news/business-21515024
This article outlines Japan's current trade issues and the fact that the Yen is on the decline and the trade deficit they are running hit a record high in January of this year. These facts were due in part to the fact that Japan is increased its imports mainly on LPG, liquid petroleum gas, because most of Japan's nuclear reactors have remained closed. This coupled with the fact that Eurozone in its current shape during its debt crisis, Japan's biggest exporter has significantly reduced their demand for Japanese goods. Thus, increasing the imports and decreasing the exports and causing the net exports to decrease and run a trade deficit. Even though Japan is currently in a trade deficit and the current value for the Yen is so cheap, there seems to be a light at the end of the tunnel, the decline in the demand for goods being exported to the Eurozone has slowed this month, Japan's exports to China have raised 3%, and the exports to US have jumped up 10.9%. With these factors in mind there is hope in this mainly exporting economy that the Yen will stay relatively weak and exports will increase for Japan and get them out of this current rut and revamp the powerhouse that is Japan's exports.
The Japanese Prime Minister, Shinzo Abe, is currently arguing for aggressive devaluation of the Yen to boost Japan's competitiveness in the global market. With the Eurozone hopefully recovering, demand from that direction should grow. That is a good sign for Japan since Europe is a big market for them.
ReplyDeleteIdeally, they will be able to heighten their exports to the point where they can shrink their trade deficit. However, if the Yen continues to devalue and exports do not increase sufficiently, the increased expense of imports will simply widen the trade deficit further.