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Asia Economy Last Updated: Aug 19, 2015 - 2:59 PM


Japan's trade deficit widens and GDP falls despite 33% yen devaluation
By Michael Hennigan, editor and founder
Aug 19, 2015 - 7:39 AM

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Shinzo Abe, Japan's prime minister, at a ceremony for the War Dead, Aug 15, 2015

Japan Wednesday reported its biggest trade deficit since February, as exports slowed and the decline  in imports widened. On Monday Japan reported that GDP shrunk in the second quarter —  the yen has fallen 33% against the US dollar since early 2013 when the Bank of Japan began a massive programme of quantitative easing (bond buying in the market commonly known as money printing).

Export growth fell from a 9.5% year-on-year rate in June to a 7.6% rate while imports contracted by 3.2% after a 2.9% drop in June. July export volume edged up 0.3% from June, after a 2.3% rise in June.

Demand in Europe accounted for most to the gain, with exports volume rising 2.1%. Exports to the US gained 0.7%, while those to China and the rest of Asia weakened by 0.6% and 0.9% respectively.

However, exports fell 0.7% on a volume basis from June 2014 amid a slowdown in the Chinese and other emerging economies.

"As for automobile-related exports, they have not been doing well in recent months on a volume basis compared with a year ago," a finance ministry official said, according to Kyodo News.

While Japan had a goods trade deficit for the fourth month in a row in July but the value shrank 72.3% from a year earlier to ¥268.1bn ($2.2bn), the government said, as imports were pushed down by declining crude oil prices.

Gross domestic product fell an annualised 1.6 % in the second quarter from January-March, ending two quarters of growth, the Cabinet Office said Monday.

Growth in the first quarter of 2015 was revised upward to 4.5% on an annualised basis, following 1.4% annualised growth in the fourth quarter of 2014. However,  those two quarters of growth followed two quarters of shrinkage.

Reuters says Japan's economy grew just 2% since Shinzo Abe took office as prime minister in December 2012, even as he deployed fiscal stimulus roughly equal to 3% of GDP.

"The effect of Abenomics hasn't expired, but the policy steps haven't boosted wages enough to meet rising living costs," said Yuichiro Nagai, an economist at Barclays Capital Japan.

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