The data out of Japan today were confusing not just because they reflected economic performance in three separate time periods—GDP from the fourth quarter of 2012, current account data from January, and bank lending from February—but because they also offered a cloudy read on how well Abenomics is working.
The country’s fourth-quarter GDP was revised to 0.2% quarter-on-quarter growth—much better than the -0.1% originally tallied. Here’s how that trend has played out over the last few years:
As you can see, Q4 data arrested three quarters of shrinking. Slightly promising signs include that household consumption came in higher than it did in Q3, and private residential investment rose for a third quarter in a row.
Does it mean Japan’s economy is finally in an upswing? Other data out today show that it’s way too early to tell. First there was Japan’s current account (pdf), which measures the country’s exchange of goods, services, and capital with the rest of the world. In January, Japan’s current account ran a ¥364.8 billion deficit ($3.8 billion). That’s the third straight month of deficit, after Japan eked out a surplus for all of 2012.
The gory details from that dataset come in the trade statistics. At ¥4.65 trillion, exports were down more than they have been in a year, though they were 6.7% higher than last year. January is usually low, though, and that could also be distorted by Lunary New Year trade disruptions.
Imports, which came in at ¥6.13 trillion, were up 6.6% on last year. This flags again the risk of the cheap yen—that export growth won’t be enough to offset the hit to spending power of Japanese households and companies as the prices of energy, which Japan produces very little of, rise. (More here and here on Japan’s foreign energy dependence.)
So the yen debasement of Abenomics isn’t producing instant results. That’s not exactly surprising given the continuing decay of European demand, as well as the ongoing strife with China. And as Takeshi Minami, chief economist at Norinchukin Research Institute, told Reuters about the effects of currency weakening, imports generally tend to get worse before exports will get better. Preliminary data from February suggests that that trend is still underway.
Last but not least, bank lending rose 1.9% on the year in February, after rising 1.6% in January. That’s the smallest piece of data out today, but if those loans are flowing to small businesses, which the government needs to revive in order to spur genuine growth, it could be the best news of the lot.