When Japan’s Prime Minister Shinzo Abe came to power in late 2012, he hoped a weaker yen would give exporters a much-needed boost as well as spur the inflation needed to revive the world’s third biggest economy.
Eighteen months on and after an almost 30 percent decline in the yen’s value driven by massive monetary stimulus from the Bank of Japan, the currency has failed to lead to the export boom the government had hoped for.
Japan’s annual exports declined in May for the first time in 15 months, latest data show. More disturbingly, say economists, is that the yen’s decline has failed to boost export volumes, which peaked in 2007 and fell for a third year running in 2013.
Frederic Neumann, co-head of Asian economic research at HSBC, says the impact of a weaker currency will be felt; it will just take longer than anticipated.
“The Japanese export boost has yet to come. Once Japanese firms have taken the decision that they want to gain foreign export share and start to factor in a weaker yen and build up domestic capacity for expanding production, we will see an impact,” he said.
“We think this will happen gradually and exports will start to pick up in the second half. The real kick is only likely to come in 2015/16,” Neumann added.