The Japanese trade deficit became narrower in August as the country cut back on its imports in order to lower the national energy bill.
Japan has relied heavily on imported energy since the Fukushima disaster in 2011 where a tsunami caused a nuclear meltdown of the local power plant. Before that nuclear energy provided around 30% of the country’s energy but since the accident happened it has, understandably, taken a back seat in Japan’s energy concerns. As such energy supplies have had to be imported thus ballooning the country’s national deficit but as Japan seems to be steadying itself and yet again finding its feet, energy imports have been cut significantly enough to reduce the deficit once more. The shortfall between imports and exports fell by 2.4% from the month prior to around 948.5bn yen ($8.7bn; £5.4bn).
This narrowing is a positive sign that the world’s third largest economy is once again on the upturn after a torrid 26 months following earthquakes and tsunamis that wrought havoc on the islands and the economy as a whole but now the strength seems to be returning and Japanese officials will be hoping for a build-up of momentum from this along with further foreign investment, specifically in their besieged energy sector and a stimulus plan that has been put in place by the central bank is facing fresh demands for expansion in order to encourage this.
Private consumption makes up 60% of Japan’s economic activity and the resulting slowdown has been linked with a tax hike on the sales tax from 5% to 8% in an attempt to combat deflation but there have been calls to defer any decisions on whether to introduce an even higher rate.
Despite the troubles it has been experiencing, Japan did see a growth of 1.5% in the economy during the first quarter of 2014 which was then followed by near a 4% year-on-year increase in exports in July. It is signs like these that would suggest the country is just a whisker away from heading towards serious growth yet again and now might be the prime moment for investors to strike in order to make the most of the coming upturn.
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