Japan’s industry activity, combining construction, agriculture, the public sector and industrial output, rose 0.5 percent in July on a monthly basis, marginally beating expectations of a 0.4 percent uptick and following a decline in June of 0.6 percent, data from Japan’s Cabinet Office showed.
Japan’s leading economic index, which consists of 12 indexes such as account inventory ratios, machinery orders, stock prices and other leading economic indicators, was at 107.9 in July, slightly higher than June’s reading of 107.3, according to official data. The country’s coincident index, which tracks the current state of the economy, was 107.7 in July, up from June’s reading of 106.6.
Japan’s trade deficit narrowed in August to 960.3 billion yen ($9.78 billion), coming below analysts’ expectations of a deficit of 1,070 billion yen and July’s deficit of 1,024 billion yen.
Exports rose 14.7 percent on a yearly basis, up from 12.2 percent in July but at a slower pace compared to the forecast of a 15.1 percent growth, while imports grew by 16 percent, slower than July’s 19.6 percent jump and expectations of 18.5 percent, data from Japan’s Finance Ministry showed, on Wednesday.
Japanese exports to Asia rose 13.5 percent year-on-year for the sixth straight month, and exports to China were up 15.8 percent for the fifth consecutive month. Exports to the EU rose 18 percent, for the third consecutive month, while those to the U.S. were up 20.6 percent, which was the eighth straight increase.
“There are tentative signs that the weak yen is having the hoped-for effect on external trade. In August, export volumes were growing faster than import volumes for the first time since last May. But a surge in export volumes still remains unlikely,” Capital Economics said, in a research note. “The ongoing strong rise in the value figures reflects the mechanical impact of the weak yen. Looking ahead, this effect should fade.”
A strong, sustained improvement in export volumes remains unlikely, according to researchers, primarily due to a continuing weakness in global demand, and because the weak yen has only had a limited effect on Japan’s exports.
Japan had been a posting a trade surplus until March 2011, when the nation was hit by a devastating earthquake and tsunami, which triggered a nuclear meltdown and a subsequent shutdown of the country’s nuclear reactors. Imports of crude oil and natural gas have been surging since, reversing the country’s surplus into a deficit.
On a seasonally-adjusted basis, trade deficit in August was 791.4 billion yen, less than expectations of 819.2 billion yen and July’s figure of 911.1 billion yen.
Gayathri writes about geopolitics and business for International Business Times. She began her career at the Times of India as news coordinator, before moving on to IBTimes...