Exports prop up Japan growth as yen falls

Concerns remain that Japan’s persistent trade surplus with US may make it a target of Trump’s criticism

Japan’s economy grew for a fourth straight quarter in the final three months of last year as a weaker yen supported exports, but tepid private consumption and the risks of rising US protectionism cast doubts over a sustainable recovery.

Data yesterday showed the world’s third-largest economy grew an annualised 1.0 per cent in October-December, roughly in line with the 1.1 per cent increase markets had expected, following a revised 1.4 per cent expansion in July-September.

Japan’s export-driven growth over the quarter has helped fill the economic shortfall left by anaemic domestic demand, but accompanying this tailwind are concerns Japan’s persistent trade surplus with the US may make it a target of US President Donald Trump’s criticism.

During a weekend meeting with Prime Minister Shinzo Abe, Trump held off from his previous rhetoric against Japan for using its monetary stimulus to weaken the yen and gain an unfair trade advantage. But analysts doubt a honeymoon would last long.

Economy Minister Nobuteru Ishihara said Japan remained in a moderate recovery trend and expected the positive momentum to be maintained, but he sounded a cautious note on the outlook.

“Attention should be paid to uncertainty over global economy and fluctuations in financial markets,” he told reporters after the GDP data release. Analysts were equally cautious about the outlook even as a weak yen has provided exports a lift.

“The fact that the economy grew a fourth straight quarter on the back of exports should be considered a passing mark for policymakers,” said Hidenobu Tokuda, senior economist at Mizuho Research Institute.