For the first time in nine months, Japanese exports gained momentum in November on the back a weak currency.
Export grew by 9.1% over the last year, the Finance Ministry said in a statement. On month-on-month basis, it showed a growth of 7.8%. However, analysts are highly skeptical about the growth momentum. Making matters worse, the government predicted a growth rate of 1.5% for next year, much lower than current year’s 3.5 percent.
On the positive side, the government predicted a reversal of deflation, a state when prices of goods and services fall. Japan has been witnessing price fall for the last twenty months, a disturbing trend the government has failed to arrest. The government however issued warning stating that the problem of deflation is far from over.
Deflation is a dangerous economic situation since consumers tend to delay purchases anticipating further price fall. As demand for goods and services fall, industry responds by cutting production, thus seriously hampering growth.
Takeshi Minami, an analyst at the Norinchukin Research Institute said: “As the global economy is clearly slowing, although it is not deteriorating, Japan’s annual export growth may turn flat between January and March, which would weigh on the economy’s growth”.
Cautioning that government spending will barely boost demand he added: “the government could hardly do anything about it, with little room left to boost fiscal spending”.
The government is trying to boost the economy by creating more jobs and has announced a stimulus package of $61 billion (£39billion) to that effect.
On Tuesday, the Japanese Central back kept key lending rates between 0 & 1% to boost private borrowing. In October it had announced asset purchases worth 1 trillion Yuan ($60 billion, £40 billion) to boost demand.
Japan posted a robust economic growth of 4.5% in the third quarter, but economists dismiss it as a one off phenomenon. They expect a much lower growth rate in the fourth quarter.