With its broad range of world-beating industries, Japan should have no trouble at all to sell - and outsell - anybody on world markets. Asia, in particular, should be Japan's most important export playground. That area is the fastest-growing segment of the world economy, it represents one-third of the global output and takes 53.3 percent of Japan's total overseas sales. Unfortunately, Japanese exports to Asia and the rest of the world are not doing well. They plummeted at an annual rate of 8.4 percent in the first four months of this year. Over the same period, exports to Asia fell a whopping 11.5 percent, marking a continuation of Japan's weakening export trend to its Asian neighbors observed during 2015. It is intriguing that all that is happening to Japanese exports in (Asian) economies where GDPs are advancing at annual rates between 3 percent and 7.3 percent.
Japan could be a world-beating exporter but went for easy BOJ money instead
Tokyo, we have a problem. Last week, market tumult stemming from the U.K.'s vote to quit the European Union drove the British pound to its weakest levels in three decades. Yet it also sent investors flocking to traditional safe haven assets like the U.S. dollar, gold and the yen, the latter surging against every major currency as the results of Brexit became clear: Dollar/yen spiked from a Thursday high near 107 to a two-year low near 99. Meanwhile, the pound lost more than 8 percent against the yen and the euro shed more than four percent to hit a three-and-a-half-year low.
Brexit fears send yen soaring, complicate Japan’s efforts to manage policy
The International Monetary Fund’s fiscal department estimates that Japan did a consolidation of over 2 percentage points in 2014 and another half point or so of fiscal consolidation in 2015, net of any gains from lower interest payments.* Japan has a history of passing lots of highly hyped stimulus packages. But in many cases those stimulus packages just offset the roll-off of past stimulus packages, without generating much net fiscal impulse to the economy. Postponing the consumption tax hike consequently makes a great deal of sense. Japan’s economy—the domestic side at least—never recovered from the last hike.
Follow the Money » Japan’s First Consumption Tax Hike Was a Demand Disaster