Emerging markets’ woes hit Japan’s exports
September 15, 2015, 9:00 pm

Japanese markets closed mostly mixed on the Bank of Japan’s decision not to alter monetary policy, Tuesday [Xinhua]

Following two days of meetings on the state of health of Japan’s economy in the wake of the latest crisis fueled by China’s slowing growth, the Bank said that a decrease in exports had led to a decline in industrial output. Japan is also experiencing its biggest trade deficit in six months.

Its economy contracted 0.30 per cent in the second quarter from the first quarter, but the Bank of Japan on Tuesday said it would not alter its monetary policy, slightly lifting domestic stock exchanges, which were also waiting to see if the US Federal Reserve would raise interest rates later this week.

Japan, one of the world’s biggest exporters of goods, has seen global demand for its wares significantly drop in the past few months as client countries – particularly emerging economies – struggle to deal with devalued currencies and weakening economies.

China’s growth remains key, in this respect, because it was the largest importer of commodities and goods from key emerging countries.

As it’s economy slows from two-digit figures just five years ago to about 7 per cent projected for 2015, its appetite to import begins to decrease as it looks to shore up domestic spending.

As a result, emerging economies start to drop the value of their currencies to make their products cheaper. This in turn means less cash flow from exports and therefore, less foreign currency to import goods.

“There are effects through trade, investment and finance, but trade is the big one, so if China’s economy maintains stable growth our exports should too,” Haruhiko Kuroda, the Bank of Japan governor, told reporters following the two-day meet.

Kuroda’s position isn’t far from concerns voiced by International Monetary Fund’s Christine Lagarde

“The major challenge facing the global economy is that growth remains moderate and uneven,” she told reporters following a meeting of senior finance officials from G20 countries in Ankara, Turkey.

“For the emerging market economies, prospects have weakened in 2015 relative to last year, though some rebound is projected next year. For both the advanced and emerging economies, productivity growth continues to be low,” she warned.

Financial markets have so far signaled chaos as uncertainty over China’s growth transition continues, triggering fears that saw investors pull capital from the Asian region.

The BRICS Post with inputs from Agencies