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Japan on a double whammy

in International Business

Japan on a double whammy

Japan hits its highest trade deficit record for the first half of the year.

Exports have weakened, rising only 1.5% during the period. Japan’s exports have been hit severely due to the falling demand in the global market, mainly the Eurozone.

Shipments to the EU declined by 21.3% from a year earlier and to Chine were down by 7.3%.

The country’s economy relies heavily on imported fuel for their rising fuel demand, as most of Japan’s nuclear reactors remain shut.

The weak exports and extreme sensitivity to import prices have resulted in a USD 37bn deficit in Japan’s trade balance.

Analysts warned that exports may continue to remain weak in the near term.

“Exports remain sluggish and you can’t expect much from external demand to drive the Japanese economy in the latter half of this fiscal year,” said Yasuo Yamamoto a senior economist with Mizuho Research Institute.

The second whammy to Japan comes from its falling imports, indicating that domestic demand in Japan was not increasing enough to offset the decline in exports.

Imports fell by 2.2% during the month, from a year ago, after having jumped more than 9% in May.

While a big role in the decline in imports was played by the fall in oil prices, analysts said that the drop in Japan-bound shipments of other commodities indicated an overall weakness in domestic demand.

Imports of iron and steel products fell 12%, while shipments of non-ferrous metals declined more than 10%.

Analysts said the slowdown in exports, coupled with a weak domestic demand, indicated that Japan’s growth may slow down.

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