The Japanese government knows all about keeping face and how to make the bad look good. Japan last week printed a historic trade deficit for 2012 with exports hit by a bitter diplomatic spat with its biggest market China and plunging demand in debt-wracked Europe. Japan’s trade deficit with Beijing doubled to a record 3.52 trillion yen last year, as a feud over a chain of islands in the East China Sea spurred anti-Japan protests across China and a consumer boycott of Japanese goods. The small islands contain some of the largest deposits of rare earth minerals in the world and would ease Japan’s dependency on China’s minerals. The ongoing territorial dispute flared in September after Tokyo nationalized some of the Senkakus, which Beijing refers to as the Diaoyu islands.
The economy showed a major contraction in the Q3 after a slip in the previous three months, meeting the technical definition of a recession. The poor trade and growth figures underscore the size of the task ahead for the new government under the aggressive Abe, which has heaped pressure on the Bank of Japan for more monetary easing to boost the deflation-plagued economy. Just last week, Angela Merkel German Chancellor accused the Japanese government of currency manipulation as the JPY tumbles helping to support exporters but weighing heavily on imports.
Yesterday the government hailed upbeat factory output numbers as a turning point for the beleaguered economy as Prime Minister Shinzo Abe’s new government strives to reverse the nation’s fortunes. But failed to mention that Abe had only been in office for a few days not long enough to affect changes in last month’s numbers. “Industrial production shows signs of having bottomed out,” the economy ministry said in a positive statement. A survey of manufacturers in the world’s third biggest economy released with the data found that producers expected another increase for January of 2.6% and 2.3% in February.
This morning Japan’s industrial production rose less than economists forecast, suggesting that a recovery in the nation’s manufacturing sector is lagging a weakening yen. Output rose 2.5 percent from November, when it declined 1.4 percent, the Trade Ministry said in Tokyo today. The median estimate of 25 economists was for a 4.1 percent gain. Production fell 7.8 percent from the previous year. The outlook for the economy may improve this year as the depreciating yen and Prime Minister Shinzo Abe’s fiscal stimulus measures help to support corporate profits and stoke growth.
Government officials are hoping that Japan’s economy continues to pick up, given the latest large-scale stimulus package is likely to help boost growth, with the global economy also starting to recover.
Just yesterday the government approved Prime Minister Shinzo Abe’s stimulus package entailing ¥10.3 trillion in central government funds in an attempt to add around 2 percentage points to the nation’s real gross domestic product growth and create at least 600,000 jobs. The previous quarterly report, released by the Finance Ministry in October, said economic activity “showed some pausing” in the three months to September on weak exports and output amid shrinking demand overseas. The JPY is trading against the US dollar at 90.82 after breaking the 91.00 level while the EUR/JPY continues to climb well breaking records, trading at 123.23