Export figures improve, spurring Japanese expansion

Figures for the first quarter of the year have revealed encouraging indicators for Japan’s economy as growth rate has increased.

The export-dependent economy expanded by 1.3 percent compared to the previous 3 month period according to data released by the Cabinet Office.

The overall annualized figure of 5 percent is still below the government’s target however, and the country’s finance minister, Naoto Kan, called on the Bank of Japan to help with rampant deflation even though the country seems to be going through a “temporary revival”.

Japan has been experiencing the latest steady recovery mostly due to large imports of household appliances and cars from the world’s second largest economy, China. Clarus China Everbright, a major investment and asset management company, have increased export investment by 25 percent this year, and other large Chinese finance houses have followed the trend.

Many analysts are cautious however. “It would be unlikely that this mini-drive will continue into the next quarter,” said Norinchukin Research Institute analyst Takeshi Minami. “Exports cannot continue at this level throughout the year.”

Japan has always been overly dependent on their exports for economic growth, due to their flagging domestic consumption. With a rapidly shrinking and ageing population, that situation doesn’t look set to improve any time in the near future.

The issue of deflation compounds Japan’s problems as businesses and their customers will generally hold off on major purchasing, as they expect prices to dip even further.

The central bank have been battling declining prices for years and a spokesman for the IMF recently said that inflation is likely to get back into full swing in 2011.

The financial community in Japan will be buoyed by the current data, and there are indications that the recent upswing is encouraging slightly increased household spending, according to Roland Buerk of BBC Japan.

Buerk said that better growth will aid the country in fighting an increasingly worrying debt level, a factor prominent in the public eye after the Greece crisis. The IMF has warned Japan several times this year that they need to address their debt issues as a priority.

An IMF spokesman recently said that the country should “bump taxes in order to reduce its massive debt, which is at a level unseen in any developed nation” and continued that 240 percent of GDP was “unacceptable”.

Japan has poured trillions of yen into its system since the financial meltdown of 2008 in an attempt to stave off the worst of the crisis. Only time will tell if the strategy has done more harm than good.