News for Credit Professionals       NACM-SE

Are Surprise Japanese Trade Numbers Show of Resilience, or Delaying the Inevitable

Last week, Japan’s finance ministry reported the value of exports at 5.44 million yen, and imports coming in just short of 5.41 million yen. The trade surplus, which came even as exports dropped by 2.7% and imports rose 9.2% compared to the previous February, surprised market-watchers and drew claims of a resilient Japanese economy that wasn’t given enough credit as it recovers from last year’s natural disasters.

NACM Economist Chris Kuehl, who was among several who noted in March's edition of Business Credit that noted “fear” for the Japanese economic and trade outlooks going forward, admitted “unmistakable progress” has taken place there, However, there reasons for deep concern have not full faded…far from it, actually.

“The endemic issues that have plagued Japan for over two decades have hardly disappeared, and they will continue to be a drag on the economy unless there are some fundamental changes made to chronic structural flaws,” said Kuehl. The biggest threats are as follows:

  • How the nation handles its energy needs, especially with an expected, perhaps unavoidable movement away from nuclear power, at least in the short-term.
  • Can the export sector overcome advantages held by other regional nations’ manufacturing sectors, especially China, and the overly high, even troublesome value of the yen as investors take money out of the euro.
  • One word: debt…the debt-to-GDP ratio presently is tracking at an astonishing 225%.

Brian Shappell, CBA, NACM staff writer