Weak trade and other data point to Japanese slowdown

Japan's economy probably slowed in the second quarter and today's report on the balance of payments provided additional evidence of it.

The Finance Ministry reported today that exports rose 29.2 percent in June from a year earlier, less than the 33.8 percent rise in May. June's exports were 0.6 percent lower than May's on a seasonally-adjusted basis.

Imports rose 29.6 percent in June from a year earlier, less than the 37.8 percent rise in May. June's imports were 5.7 percent lower than May's on a seasonally-adjusted basis.

The bigger fall in imports resulted in the trade balance rising to 769 billion yen in June, 26.6 percent higher than a year earlier. However, a fall in the income surplus resulted in the June current account surplus falling 18.2 percent from the previous year to 1,047 trillion yen.

The Cabinet Office's economy watchers survey findings also released today provided a mixed picture. The survey's diffusion index for current conditions rose to 49.8 in July, recovering to its peak in April after two consecutive months of decline. However, the diffusion index for future conditions fell for a third consecutive month to 46.6 from 48.3.

The Cabinet Office's composite indices released on Friday had also indicated that economic growth was probably maintained in the second quarter but could weaken in subsequent quarters. The coincident index rebounded to its post-recession peak of 101.3 in June after having dipped to 101.2 in May. The leading index rose to 98.9 in June from 98.6 in May. However, the latter remains below its March and April levels of 101.9 and 101.7 respectively.

The Organisation for Economic Co-operation and Development's composite leading indicators (CLI) released on Friday also indicated a likelihood of a slowdown in Japan. The OECD reported that the CLI for Japan rose by just 0.1 in June to 103.1, the same rate as in May but below the rate of increase in prior months. A decline in the CLI for the OECD area as a whole by 0.1 to 103.4 certainly will not help the export-dependent Japanese economy.

According to Bloomberg's survey of economists, the Japanese economy is expected to grow at an annualised rate of 2.1 percent in the second quarter after having grown at a 5.0 percent rate in the first quarter.