Trading Economics: Japan

Japan’s GDP has been fluctuating since the 1980s

Exports have been driving Japan towards economic growth in the past 6 years.

In the past 20 years, there were various economic events that lead up to this day. In the 1980s, quotas decreased. A quota is a type of protectionism that is imposed by the government to set a limited or fixed number of imports to save domestic firms. Those products still under the quota called in complaints by exporting countries. In 1991, Japan agreed with the United States to end quotas on beef and citrus fruits. Another product that is often debated even today, is protectionism on rice. Rice is a prominent food source for the Japanese and domestic farms also played a significant role in cultural importanceーthis is the main reason why rice is under protectionism. Moreover, the level of manufactured imports in Japan were low in the 1980s, specified in the gross national product (GNP) numbers. In 1985, the yen appreciates, which made imports more attractive for Japanese consumers. This started a domestic debate over non-tariff barriers and other structural features of the economy  impeding imports. The increasing trade surplus over two years were the result of appreciation of yen and lower crude oil prices at the end o the Gulf War that pushed down import prices.  However, imports decreases because of Japan’s heavy protectionism on import volume. The import prices brought about by falling primary goods and the Asian currency crisis, resulting in the 1998 trade surplus expansion. Further, Japan invested in Eastern Asia and its expansion of local production activitiesーso Japan could increase the shares of capital equipment and machinery. Many Japanese companies have shifted their production towards East Asia, which has increased exports to east Asia while increasing imports from Asia.

When the current account balance is interpreted as the disparity between savings and investment over the estimation period, the savings-investment balance (against GDP) for the household sector indicates that excess savings held stable. Japan’s current account surplus created a capital and financial account deficit.

“Japan October Export Growth Slows” Published: 11/25/2010 8:35:37 AM    By: TradingEconomics.com, AFP

In october, Japan has recorded the slowest pace of its exports in history. There seems to be a shifting demand towards foreign goods. This also brings up the problem of the strong yen at the moment, which encourages Japanese consumers to choose imports over domestic products.  Only China has shown its robust appetite in Japanese products. “A strong yen not only makes Japan’s growth-driving exports more expensive but erodes companies’ overseas profits when repatriated, with many firms considering sending more production overseas as a result”. Japan has shown an increase in trade surplus by 2.7%.

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