Economists said the decline could be attributed to the Bank of Japan’s decision to keep interest rates low. As the U.S. has repeatedly raised interest rates, the interest rate differential has led to a sell-off in the yen as investors flock to the dollar in search of higher returns, experts said.
A weaker yen is good for Japanese exporters, whose products are cheaper for overseas customers, as well as other Japanese companies with significant overseas income and investments.
But those benefits appear to be offset by pressure on the domestic market, as both businesses and consumers have to pay more for imported goods, whether raw or finished.
A weaker yen has left Japan with a record trade deficit. The value of imports surged nearly 45% in the first half of the fiscal year, from April to September, as fuel prices soared. By contrast, exports rose by less than 20 percent.
Still, Stefan Angelik, senior economist at Moody’s Analytics, described the trade side of Tuesday’s results as “counterintuitive good news,” writing in a note that “the third quarter The pickup in imports reflects the fact that Japan’s belated Covid-19 recovery is gaining traction as businesses and households restart spending.”
Japan’s benchmark Nikkei 225 closed up 0.1 percent in Tokyo on Tuesday.
Looking ahead, the picture is mixed. Despite the weak yen, overseas demand is likely to weaken in the face of China’s ongoing “coronavirus zero” policy and a global slowdown intensified by central banks trying to keep pace with the Fed’s rate hikes.
On the other hand, Japan’s continued adjustment to pandemic living, the reopening of tourism in October, and a massive government stimulus package aimed at offsetting the impact of inflation may all contribute to a modest and sustained recovery in domestic consumption, which remains well below pre-pandemic levels level, Mr. Kobayashi or Mitsubishi UFJ. Business investment will also continue to grow as Japan pushes to digitize its economy.
All in all, sir. That means, despite the unexpected setback in the quarter, “it is already certain that we will return to positive growth in the next three months,” Kobayashi said.