Japanese Economy may witness Shallow Recovery in Third Quarter

Japanese Economy may witness Shallow Recovery in Third Quarter

Japan released the latest economic data marking the 26th consecutive trade deficit on Thursday. The data showed that the exports declined in August, as the shipments to the United States narrowed.

The data has raised concerns that due to lower exports, the economy may have a shallow recovery in the third quarter. Japan's economy dropped on an annualized basis in the second quarter, mainly hit by the tax hike. It was one of the biggest contractions since the global crisis of 2009.

Exports of the nation fell by 1.3% in August from a year ago, less than the average estimate for a 2.6% annual decline. This was followed by a 3.9% annual gain in the previous month.

Since the time Prime Minister Shinzo Abe launched his pro-spending stimulus policy in late 2012, Yen saw a sharp fall, as the policy was not able to make any improvements in the exports. Another major reason behind the lower exports is shifting of production to lower-cost venues abroad by many Japanese companies.

The finance ministry data showed that August trade deficit of Japan came in at ¥948.5 billion ($8.7 billion) against a shortfall of ¥971.4 billion a year ago.

Experts said that this contraction was to some extent due to a 1.5% fall in the imports to ¥6.65 trillion, as the bill for the foreign oil and coal shipment declined.

In addition, Japan's fossil fuel import increased after the 2011 nuclear crisis of Fukushima that led to forced shut-down of nuclear reactors that once supplied more than 1/4th of the nation's power.

On the other hand, increase in the demand for machinery and cars narrowed Japan's deficit with China, its biggest trading partner, by almost 24%. Due to fall in the demand for vehicles, trade surplus with the United States lessened 22%.

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