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Japanese exports fall by 3.3%

Japan's exports fell for the fifth month in a row in July as the country contends with a strong yen and the ongoing impact of the earthquake and tsunami earlier this year.

Exports fell 3.3% from a year earlier to 5.78 trillion yen (£45.7 billion), the government said.

Exports are a key driver of the Japanese economy and the country is hoping that overseas demand will help it bounce back from the double natural disaster of March.

Data earlier this week showed that the economy is still mired in recession, shrinking for the third quarter in a row in the April-June period.

The earthquake and tsunami damaged or destroyed factories in north-east Japan, which led to serious parts shortages for manufacturers in the car and electronics industries. While the country has made progress in restoring production, it now faces new threats.

A surging yen, which has recently tested record highs against the dollar, is painful for Japan's exporters. It reduces the value of their foreign earnings and makes Japanese goods more expensive in overseas markets.

The yen is harming the bottom lines of companies like Nintendo, which makes 80% of its sales outside of Japan. It is also forcing manufacturers like Panasonic and Hitachi to consider shifting more production overseas.

Japan intervened in currency markets earlier this month to try to reverse the yen's climb. The decision to sell the yen and buy the dollar worked initially, sending the greenback towards 80 yen. But the dollar has been weighed by the dimming outlook for the US economy and is now back down to mid 76-yen levels.

Monetary authorities could turn to intervention again if the yen continues to strengthen.

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