Weekly Market Review - Abe needs to cash the check

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Last week presented some significant data in the Japanese economy. This yielded a natural opportunity to examine where the economic policy, advocated by Japanese Prime Minister Shinzo Abe, led the country so far. The week kicked off with the Japanese Ministry of Finance publishing the country’s trade balance statistics. At -¥918.6 billion, September’s Trade Balance appeared as an improvement over the previous month’s -¥962.8. However, the Japanese exports presented only a 11.5% increase during the trailing 12 months, much lower than an expected 15.6% predicted by analysts.

On Friday, the hope that the inflow of cash to Japan would help boost prices dispersed, with the publishing of the Consumer Price Index. The Index’s headline figure presented a relatively high 1.1% annual increase of prices. This was likely the result of the weakening Yen and volatiles such as food, as the Consumer Price Index, (excluding Energy and Fresh Food) presented a more moderate 0.7% annual increase. The 0.7% core increase figure is high compared to the negative figures the index suffered since 2008, should no accompanying wage hike take place, increasing prices could lead to a decrease of the Japanese consumer’s purchasing power and a resultant decrease of GDP. Indeed, the Japanese Monthly Cash Earnings, measuring mostly wages, presented a -0.9% annual decline in August. Moreover, analyst consensus predicts September’s figure to present -0.4%, which is not much better. 

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