"There is no major change in the trend of exports failing to pick up. We still can't hope for exports to offset a drop in domestic demand and help bolster capital spending."
- Norinchukin Research Institute Co. in Tokyo
Opposite to Swiss international trade data, Japanese statistics posted an improvement in August of this year, as negative balance decreased to 948.5 billion yen from 1.02 trillion yen a month before. While overseas shipments went down 1.3%, imports dropped 1.5%, which led to better figures. Nevertheless, the net export is still unable to provide enough support to economic recovery in times, when Japan needs it the most. This April the government raised the sales tax from 5% to 8%, as it resulted in falling consumer spending and consecutive GDP plunge, the largest since the Great Recession. Despite that, Shinzo Abe's government is planning to increase the mentioned tax further to 10% in foreseeable future to narrow the budget gap. With weak domestic demand in the country, the cheap money policy of the Bank of Japan is set to bolster capital spending and investment, which may become the growth engine in the mid-term. The OECD has already lowered Japan's GDP growth forecast for this year to 0.9%, fearing negative influence from rising consumption taxes on the economy.
The Bank of Japan, however, is pointing on waning impact from April's tax hike, while economy of Japan is recovering gradually. The speech by BoJ's Governor Haruhiko Kuroda on Thursday made it clear that the regulator is ready to push even more stimulus into the economy, if it shows no considerable signs of rebound.
© Dukascopy Bank SA