Japan Riding the China Wave
by Edward Hugh
Japan’s trade surplus leapt almost 400 per cent in January as surging exports to Asia continued to support the domestic economic recovery there while shipments to the US actually declined. Japan's trade surplus jumped to Y507bn (this should be compared with the Y103bn of January 2003) with overall exports up 11.3 per cent, according to government data released on Monday.
News of the sharp rise came hot on the tail of an abrupt fall in the yen against the dollar. In fact exports have been the main engine of the Japanese economic recovery and are the main component in that widely quoted 7 per cent annual GDP number (domestic consumption was virtually flat) for the past quarter.
The Financial Times quotes Peter Morgan, economist at HSBC in Tokyo, as cautioning that exports were unlikely to keep growing at such a fast pace. "Monthly export growth has generally peaked at around 15 per cent in previous cycles and we’re getting close to that," he said. For the April-to-June quarter he predicts growth to fall back to the 5-10 per cent range. This observation may help understand why the Yen is in fact falling against the dollar: the central bank is intervening to try and soften the landing by making exports cheaper.
The principal engine of export growth so far has been Asia and especially China. The value of goods sent to China rose 33.8 per cent last month while shipments to the US actually fell 5.4 per cent.
A recent New York Times article, gives some indication of the scale of the Japanese relocation to China, and indicates the extent to while the major global players have all gotten hooked onto the Chinese economy. Which means if there is any faltering here........ ...Link