So assuming it wins Government on Sunday, what sort of economy will the DPJ be inheriting?
Well, it’s no longer a basket case, as it was six months ago, but it is no where near as strong as the Chinese or Australian economies.
Unemployment is at a near record 5.4%, (And figures out Friday could see that edge higher). Retail sales are sluggish, industrial production has recovered, but remains more than 25% lower than a year ago (instead of being more than 35% down).
Inflation is not a problem, its deflation, especially for business, and increasingly for consumers.
The Bank of Japan has forecast that deflation will continue until 2011 and remains the biggest danger to the wider economy and to the Government and its tax base.
Growth is running at around 3.7% annual, but in strict terms second quarter growth, it rose 0.9% from the depressed March quarter, thanks to exports and heavy Government spending.
Exports growth has improved, as we saw for July with an increase in volumes that offset a fall in value terms, (which they had done, dropping 1.3% from June).
Ministry of Finance figures showed that Japan’s July exports fell more sharply on a year-on-year basis than in June, off 36.5% by from July, 2008, compared with the annual fall in the year to June of 35.7%
On a seasonally-adjusted basis, exports fell 1.3% from June but were up 5.3% before the adjustment.
Exports to China and the US, the two biggest buyers of Japanese goods, fell 26.5% and 39.5% respectively from a year ago.
A 4.4% rise in the yen against the US dollar in July cut export values sharply and dropped imports as well.
But figures from the Bank of Japan issued later on Wednesday showed a different picture.
In volume terms, Japanese exports rose a seasonally adjusted 2.3% in July from June thanks to stronger demand from Asia and customers overseas looking to rebuild inventories of Japanese produced products.
The Bank of Japan figures are different to those published by the Ministry of Finance, and suggest Japan may enjoy another quarter of respectable economic growth in the September quarter, which would give positive growth for the first half of 2009-10 financial year.
Monthly export volumes were up by 23% from the low point in February, but monthly export volumes are still 27% lower than they were a year ago.
Shipments to Asia rose 4.8% in volume terms in July from June.
But Japanese exports of cars and auto parts to China, where sales are up by more than 30 per cent so far this year because of government incentives, were sharply higher.
Exports of electronic components into Asia as a whole were fairly strong, indicating that consumer electronics companies in China, South Korea and Taiwan are lifting production in response to rising orders.
Sales to the US were sluggish, down 39.5% from a year ago, with a real fall in car exports.
That was linked to the ‘Cash for Clunkers’ program which ended on August 24 with 690,000 or so new cars sold. Toyota is selling cars from its US stocks and hasn’t started rebuilding them from its Japanese plants where necessary (such as for its Lexus models).
Toyota had the highest market share.
But don’t depend on Toyota and other Japanese companies to ramp up car output (Sales are rising in Japan as well for because of local subsidies for trading in older cars for greener, more fuel efficient models).
And a statement from Toyota holds all sorts of concerns for Japan and other countries.
Toyota, the world’s biggest car maker, is looking at cutting capacity on a semi-permanent basis.
Up to 1 million units could be cut from capacity around the world, reducing it from 10 million to 9 million.
Toyota won’t be the last japanese car group or giant manufacturer to make this sort of decision.
It plans to shut a car plant from the June quarter of next year to at least the end of 2011, plus a plant in California. other closures will come.
Its deleveraging, just as China is doing.
