Thursday, November 20, 2008

Japanese Trade Surplus Wiped Out

Despite the relief provided by falling oil prices (although the full effect of that has yet to be seen), Japan saw its trade surplus disappear in October as exports fell 7.7% compared to a year earlier while imports rose 7.4%. The spin by the Bloomberg journalist is that this reflects a weaker global economy, but as Japan is in a recession too, so imports should fall as much as exports if that had been the only factor.

Instead, this likely reflects the rapid appreciation of the yen. And as the full effects of that too has yet to be felt, Japan could continue to post trade deficits. This suggests that from a goods market point of view, the yen is no longer undervalued. Still, it will likely remain strong as long as the financial turmoil continues.


Blogger Jeremy Goodridge said...

This comment isn't related to this post, but I didn't know where else to put it:

Can you comment on this proposal by Mankiw on his blog, and comment on the chart he presents?

In other posts, you have touched on this: are we really to trust the market's expectations of deflation. I think the market is wrong -- particularly when you consider these are TWENTY-year bonds!


3:57 PM  
Blogger stefankarlsson said...

I'll probably comment on it later, but in the future put questions like this in the new Q&A section.

4:54 PM  

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