Weaker yen boosts Japan’s wood products exports

Japan: A weaker yen drove exports and business sentiment higher in the final quarter of 2016 which resulted in an annualised one percent growth of the overall economy. However, with consumption remaining subdued, prospects for early 2017 are subject to external influences more than a stronger internal demand which the government seeks.

In March the annual wage negotiations between unions and management began and early signs are that pay rises will be similar to last year’s which will do nothing to boost consumption. This means the best hope for the economy is a weak yen.

However the new US administration seems set to follow up on its assertion that Japan is a currency manipulator which could mean the yen will strengthen against the US dollar. This would undermine Japan’s export growth. While a weak yen is good for exporters it is bad for household spending and the prospects are rising for a clash between the Bank of Japan, which supports a weak yen, and the government that is trying to spur household spending. In addition, any further yen weakness would raise tensions between Japan and the US.

 

Source: ITTO