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Exports rise on weaker yen

Publication Date : 22-02-2013

 

Exports in January were up on a year-on-year basis for the first time in eight months thanks to the weakened yen, which simultaneously raised the prices of imported fuel, resulting in the largest-ever trade deficit for the month.

While the Finance Ministry on Wednesday announced that January's trade deficit was a record 1.629 trillion yen, the highest figure since 1979, some economists pointed out that the trade deficit will likely shrink in the medium term due to the yen's depreciation.

The exchange rate used in trade statistics one year earlier was 77.33 yen against the dollar, but last month it was 86.93 yen.

Trade statistics are calculated in the Japanese currency after figures were converted from the US currency.

The percentage of dollar-dominated imports, which reflect impacts of the yen's depreciation, was higher than that of dollar-dominated exports. Consequently, the import figure grew more than the export figure after they were both converted into yen, and the trade deficit rose sharply.

Due to the prolonged suspension of operations of nuclear reactors, imports of liquefied natural gas--used as fuel for thermal power reactors--increased 11.4 per cent from January last year to 606.7 billion yen, the highest-ever figure.

The current state of dependence on thermal power generation is expected to last for a considerable period. The import prices of fuel may further inflate as a result of the currency depreciation.

Follow the wind

Exports in January increased 6.4 per cent on a year-on-year basis to about 4.799 trillion yen. Exports to the United States, which have shown signs of economic recovery, rose 10.9 per cent. Automobile and auto parts exports to the United States grew sharply by 10.5 per cent and 29.9 per cent, respectively.

Exports to other Asian nations including China posted an increase for the first time in eight months, rising 8.4 per cent.

Profitable exchange rates for export-oriented firms are 83.75 yen for the transport equipment industry, including auto makers, 81.33 yen for the electrical equipment industry and 78.67 yen for the nonferrous metal industry, according to a study announced by the Cabinet Office in February last year.

At the Tokyo market on Wednesday, the exchange rate floated around the 93 yen mark. If the yen's depreciation continues, the competitiveness of Japanese products in overseas markets is expected to be boosted.

However, Japanese electronics manufacturers have been engaged in a fierce battle with major Asian rivals including South Korea's Samsung Electronics Co.

A certain amount of time is needed before the overseas sales of Japanese goods rise due to the yen's depreciation, triggering additional growth in exports.

For the time being, however, the trade deficit will likely remain at high levels due to the effects of rising import prices of raw materials.

Some market players say the trade balance will improve in six months to a year.

"As overseas economies such as China and the United States have been moving upward, export volumes will gradually move toward the direction of an increase," Mitsumaru Kumagai, chief economist at the Daiwa Institute of Research, said.

On the other hand, some economists say the trade deficit is here to stay.

"As the global economy moves toward a recovery, we will likely see a massive investment of speculative funds in commodity markets such as the one for crude oil, which will in turn raise fuel prices. So the trade deficit is not going to disappear so easily," said Takeshi Minami, chief economist at the Norinchukin Research Institute.

 

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