Fears that Japan’s recovery is heading for further slowdown deepened yesterday as data showed the nation’s trade with the world rose only slightly and a corporate spending indicator fell in October.
The health of the trade-reliant economy continues to draw concern as exports, its main engine for growth, slow because of a strong yen and waning overseas demand while domestic demand remains soft.
Japan’s economic fiscal policy minister Banri Kaieda told reporters yesterday that he expected growth to be “substantially lower” in the fourth quarter.
The current account surplus — the broadest measure of trade with the rest of the world — widened 2.9 percent in October from a year earlier to ￥1.44 trillion (US$17.20 billion), missing expectations of a 7 percent rise.
In September the surplus rose 24.3 percent.
Other data from the finance ministry showed core private-sector machinery orders, a leading indicator of corporate capital spending, fell 1.4 percent in October from the previous month, the second consecutive decline after a 10.3 percent fall in September.
The data also missed expectations of a 0.1 percent decline.
Yesterday’s data illustrated that the double whammy of the expiration of government subsides for automobiles and other goods and slowing US, European and Chinese demand continued to threaten Japan’s economy, analysts said.
“The next couple of quarters are likely to be tough for Japan, as expiring incentives for purchases of consumer durables hurt demand,” Richard Jerram of Macquarie Bank said. “Stalling exports and a soft industrial cycle will erode corporate profitability and damage the manufacturing investment cycle.”
However, Jerram said that robust Japanese machinery export orders indicated an acceleration of economic activity in the region and may help soften the blow for Japan.
“If exports can show some modest growth then Japan should be able to avoid recession,” he said.
Recent data showed October exports grew at their slowest pace of the year after the yen traded at 15-year highs against the dollar, hammering the competitiveness of the crucial sector.
Separately, a Chinese government think tank has warned inflationary pressures are building in the economy and consumer prices will remain “relatively high” next year, amid growing expectations of a rate hike.
The Chinese Academy of Social Sciences (CASS) also cautioned that the world’s second-largest economy was at risk of overheating next year “if the growth speed is not controlled properly,” Xinhua news agency said yesterday.
The report came as Beijing brought forward the release of key economic data for last month to Saturday from Monday, fueling speculation that policymakers were planning to raise interest rates in the coming days.
“The inflationary pressure is building up and excess liquidity would be the major factor driving the CPI [consumer price index] up in the next several years,” CASS said in its 2011 Economic Blue Paper.
The think tank forecast consumer prices to rise 3.2 percent over the entire year this year — above the government’s full-year target for three percent — and 3.3 percent next year.
“Surging grain prices in the international market and the rising cost of growing grains in China would keep the prices of consumer goods at a relatively high level,” the report said.