Japan’s Current Account widened to 1675.9 billion yen in July, topping economists’ expectations and marking the first increase in four months. Imports plunged for the second month, sliding 3.4 percent, while exports posted the first increase in April, adding 1.8 percent. Meanwhile, Machine Orders surged 8.8 percent, more than quadrupling median forecasts and amounting to he largest increase since December 2009. The outcomes reinforces last week’s impressive capital spending figures, suggesting the nominally strongest Japanese Yen in 15 years is not proving to be a hurdle for overseas sales (at least for now), hinting the return of FX intervention may not be as close as Japanese policymakers would have the markets believe.
Still, the overall trend in export growth looks worrisome with cross-border sales adding 24.7 percent in the year from July 2009 to mark the smallest annualized increase in seven months. Looking past the exchange rate, the greater danger seems to be a broad-based slowdown in global activity, an outcome that looks increasingly likely after the JPMorgan’s Global PMI gauge of economic activity dropped to the lowest in six months in August. Japan’s recovery in the aftermath of the 2008 Great Recession has owed primarily to a rebound in overseas demand on the back of global stimulus efforts, with a widespread slowdown likely to weigh heavily on the island nation’s performance.
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