Japan: One Year Later

Just over a year ago, on March 11, 2011, the northeast coast of Japan was hit by a massive 8.9 magnitude earthquake. A tsunami followed and we all know what happened next. Towns destroyed, nuclear plants shutdown, thousands of buildings lost. According to World Bank estimates, the economic cost of the disaster was well over 200 billion USD.

Naturally, there was a lot of concern on how long it would take Japan to get back on its own two feet and recover both emotionally and economically.

Luckily, the Bank of Japan stepped in big time, as it pumped in a ridiculous 12 trillion JPY in order to stabilize the financial markets. That’s right – 12,000,000,000,000 JPY! That’s a whole lot of zeroes!

The question is, has all that cash actually helped Japanese businesses weather the storm? Let’s take a look at some data shall we?

In terms of GDP, we’ve see some mixed results. Annualized GDP dropped by 2.3% in the Q4 2011, which was a complete reversal from the impressive 5.6% annualized growth we saw during Q3 2011. Part of the reason for the dismal performance was due to sputtering global demand and concerns surrounding the European debt crisis.

Japanese trade has also suffered, as Japan actually posted its first monthly trade deficit in 31 years last January, printing a deficit of 1.48 trillion JPY. That’s right – the last time Japan imported more than it exported, Pip Diddy actually had hair on his bald dome!

Aside from the slowdown in Chinese demand, Japan has also suffered from the lack of reliable energy sources, as nuclear production levels have dropped after the closing off several plants last year.

Despite the mixed data, Bank of Japan officials remain optimistic about the future.

For one, they’ve upgraded their economic forecasts, recognizing the improvements in the global economy and perked up demand from emerging economies. Officials also point to reconstruction projects as another potential demand driver.

In addition, we cannot discount the BOJ’s moves to help the economy. In the past month, the central bank has both expanded a lending program geared towards high-growth industries and its asset purchase facility. The latter move was done to weaken the yen and help stimulate exports.

Speaking of the yen, that’s another thing that seems to be in Japan’s favor right now.

USD/JPY Weekly Chart

Even after the coordinated intervention in March last year, the yen continued to rally up the charts as massive risk aversion hit the markets. Recently though, the yen has slowly been losing its luster. After finding support at 76.00, USD/JPY has been on a steady climb, rising over 700 pips. I bet BOJ Governor Shirakawa and the rest of the BOJ are somewhere drinking sake bombs right now!

With the global economy showing more signs of growth, the timing of a weakening yen couldn’t be better. Hopefully we see exports pick up in the coming months and help boost the Japanese economy.

Lastly, I just wanna give a shoutout to all of you who helped donate to our FirstGiving fundraiser. Your contributions went a long way to helping all those who were affected!


  • Andrewhedgehogging

    Finally the BOJ figured out how to weaken the yen!!! Intervention never works, so take your que (pun intended!) from the Feds and ECB and Q your currencies down.