JAKARTA - Principal Economist of IHS Global Insight Harumi Taguchi provides latest assessment of Japan’s economy. Following is the excerpt of his analysis:
Key Points:
· Japan’s trade balance turned to a surplus of JPY 243 billion (USD 2.4 billion) in February on a non-seasonally adjusted basis. On a seasonally adjusted basis, the trade surplus also rose for the fourth consecutive month in February to JPY 166 billion.
· The trade surplus largely reflected the narrower 4% year-on-year (y/y)decline in exports, thanks to an increase in export volumes following seven consecutive months of decline. The improvement in exports was due largely to a 37% rise in export of ships as well as increases in autos and some machinery exports, which contributed to increases in exports to United States, European Union and China.
· Imports also saw a slower contraction of 14.2% y/y, largely reflecting the waning y/y effects of low oil prices, although declines in imports of mineral fuels were major contributor to the sluggish import. The weakness in imports of other resources, electronic machinery, cloths and other consumer goods also weighed on total imports.
IHS Global Insight Views:
Although exports showed improvement, the trend remains weak as exports for January-February declined 8.5% y/y on average, following an 8% drop in December 2015. While increased weightings in domestic production of cars are likely to support exports to some extent, the surge in exports of ships was probably a one-off factor.
Moreover, weak imports of materials and consumer goods suggest sluggish production and a sustained slump in consumer spending. These remain a concern as a downward risk for real GDP growth over the near term.
By Harumi Taguchi, Principal Economist, IHS Global Insight