zero-sum economics

Japan’s gains from Abenomics come at the expense of South Korea

April 30, 2013
April 30, 2013

Japanese manufacturing activity ticked upward in April, according to new data from Markit, a promising sign that the government’s radical economic policy agenda is taking effect. But as a weaker yen makes Japanese exports more affordable, South Korea’s own exporters are struggling to hang on.

Markit’s Purchasing Managers’ Index, which measures the health of the manufacturing sector in Japan, rose to 51.1 in April, up from March’s 50.4 and a 13-month high. A result above 50 indicates expansion. Further official data released on Tuesday showed that unemployment fell more than expected in March and household spending surged at the fastest pace in nine years.

The Japanese government, led by Prime Minister Shinzo Abe, is determined to pull the country out of its fifth recession in 15 years through substantial monetary easing. But Abenomics has had a knock-on effect on other economies, not least in South Korea, which on Tuesday reported a third consecutive monthly fall in industrial output. In March, production in South Korean mining, manufacturing, gas and electricity  fell 2.6% from February. Vehicle production fell 9.8% as export customers went for Japanese brands, made cheaper as the yen weakens.

Despite a promising slew of data points from Japan, economists are still concerned that global demand for exports is flagging. “Overseas demand gathered momentum in the past few months, but the pace of growth is moderating a bit now,” Junko Nishioka, chief economist at the Bank of Scotland in Tokyo, told Bloomberg. “Shipments of cars to the US are slowing.”

Taro Saito, a researcher at NLI Research Institute, told the Wall Street Journal that positive data will translate into GDP growth, but even though manufacturing is one of the most anticipated indicators, it is not the most important. “GDP for the first quarter of 2013 will be strong,” he said, “but not because of strong output or exports, the things people usually look for – consumer spending is going to be a big support.”

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