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Wednesday, 22nd August 2012
In Business In Japan,

EU woes erode Japanese growth

A number of factors are eroding Japan's potential for economic growth, including poor export results to the EU and China.

The latest figures from Japan's Ministry of Finance gave a poor outlook for the economy, which slipped deeper into debt last month.

According to reports, the trade deficit was 517.4 billion yen in July, with exports to the EU falling by more than a quarter.

The country's overall exports were down eight per cent compared to a year earlier, with figures for China rising a mere one per cent.

Industries hit by a lack of demand from the EU include consumer electronics and cars, with interest in vehicles and computer chips seemingly waning.

"Europe's debt crisis is the first factor to pull down exports, and the pace of decline is striking. This is comparable to the post-Lehman situation," Masayuki Kichikawa, chief Japan economist at Bank of Merrill Lynch in Tokyo, told Reuters.

"We hoped domestic demand in China would support Japan's economy but the story is different."

While disappointing performances were witnessed in the European region and neighbouring China, these are not the only obstacles Japan needs to overcome.

The strength of the yen is doing noting to improve fiscal figures with other countries unable to compete - a situation further compounded by last year's tsunami disaster.

While the nation tried to beat off the effects of the great Japanese earthquake and ensuing tsunami, not to mention the Fukushima disaster, the government also failed in attempts to bring down the value of the currency.

Figures from Trading Economics indicate Japan's gross domestic product rose above its average rate of 2.1 per cent to 3.5 per cent in the second quarter of 2012, providing some respite for the economy.

As well as the EU and China, Japan has strong trading links with the US, South Korea and Taiwan, with exports to the States rising 4.7 per cent in July.

Posted by Graham McPherson