Japan’s Exports on the Upswing
Automobiles drive an increase in exports
Japan’s exports rose by more than 12% in the second quarter of 2009. Although this only compensates for less than half the 29% drop in exports in the first quarter, it is an important sign that Japan’s economy is getting back on track.
More than any other economy, Japan relies on exports for economic growth. This has been true in the boom days of the 1980s and it is still relevant today. Traditionally the weak domestic demand was due to inefficient firms in the local market that were protected from overseas competitors by high entry barriers. Although the Japanese government has made strides to open the market, a propensity to save and an aging population still dampens local demand.
Unsurprisingly the biggest export products are cars. Toyota, the biggest car manufacturer in the world, surprised analysts last week by forecasting a smaller loss than predicted earlier. Instead of losing 550 billion yen, it now expects to lose 450 billion yen this year. Analysts at Fortis Japan even consider it a possibility that Toyota will return to profitability in the next financial year.
Although the cash-for-clunkers program in the US has channeled quite a bit of money towards Japanese car makers, Japan’s rise in exports is mainly due to China. With Chinese GDP growth returning back to 15%+, Chinese domestic demand has picked up to the benefit of the rest of the world. An increase in income for the Chinese middle class is good news for Japan. After all, a motorised road vehicle is one of the first signs of personal wealth.