Japan’s top currency tsar reiterated a veiled threat to intervene in response to speculative moves, but traders say few options are available because it could be considered competitive devaluation, something the Group of Seven frowns on. Also, sluggish demand from foreign counterparts dragged exports down for the 10th consecutive month.
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Overseas shipments dropped 14% in July from a year earlier, missing economist estimates for a 13.7% decline.
Economists say there is a growing risk that weakness in exports will persist as global economic uncertainty shows little sign of receding, which could undermine Japanese policymakers’ efforts to re-energise the economy.
“At the same time, our global team is expecting some firming in global demand in the second half of the year, so we continue to think Japanese exports remain weak, but not collapsing”, he said.
Exports by South Korean venture companies have fared relatively well this year, although the country’s overall outbound shipments continued to suffer a setback, stung by the continued sluggishness of the global economy, data showed Thursday.
But in volume terms the decline for both was milder: export volumes fell 2.5 percent while import volumes fell 4 percent from a year earlier, Marcel Thieliant of Capital Economics said in an analysis. The region’s overall imports from Japan fell 30.8 percent, as shipments of vehicle, steel and machinery slowed.
Exports to Japan’s most important trading partner, China, fell by 12.7 percent; shipments to the U.S. were down 11.8 percent, while exports to the European Union decreased by 6.5 percent in July from a year earlier.
The yen has risen around 20 per cent versus the dollar so far this yea and further gains would cut deeply into exporters’ earnings and increase deflationary pressure by lowering import prices.
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Stronger exports, a pillar of Prime Minister Shinzo Abe’s strategy for revitalizing growth, have been crimped by lagging demand.
