Thursday, November 25, 2010

Japan Update - 25 Nov 2010

Japan just released its trade data for October, with the monthly stats showing a tapering off in annual growth, and negative growth vs September, with exports down -2% from September (up 8% vs 2009) and imports down -3% from September (up 9% vs 2009). The growth in trade disappointed against expectations and is starting to make the trend look a little less than promising for the troubled Japanese economy.

For an economy faced with the dirty D's of deflation, deficits, and debt... not to mention being caught on the wrong side of demographics, it is concerning that trade is appearing to taper off. Without reliable and sustained demand from within, Japan is left very exposed to its international trade efforts. But one interesting point in the data is that its exports to China not only grew faster than in September, but also at a much much faster pace than its exports to the US. In the medium term this is how you would want to strategically position yourself with China expected to grow much faster than the US. But even if Japan gets trade right, it's still shackled by considerable demographic challenges (i.e. aging population).

Before signing off, it's worth checking in where markets are at in Japan. The yen has continued to strengthen against the dollar, despite the recent yentervention, indeed this has likely started to show through in the trade figures. But the strong yen is also weighing somewhat on the Japanese stock market, with the Nikkei 225 muddling along sideways. But interestingly, PEs are starting to track down below historical averages in Japan (maybe justifiably so), so it may be an interesting one to watch a little closer; down but not out yet.

Econ Grapher Analytics
Japan Ministry of Finance
Yahoo Finance
Global View Forex

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