Since mid-August, the Yen has fallen significantly against the US Dollar, falling from the 102 Yen to a Dollar level to a low of almost 110 before rallying a little on fears of a global slowdown (the Yen is still regarded as a safe haven currency in times of economic storm). It is currently trading at 108.25 to the Dollar, having slipped by more than a Yen in today’s trading. The upshot of a weaker Yen is that it makes Japanese exported goods more attractive in importing markets.

As a partial reflection of this fact, Japan has posted its best rise in export figures for seven months in September. Exports rose by 6.9% (year-on-year) in September making them worth $60 billion. However, Japan is also importing more goods, having seen a 6.2% increase over the same period, leaving a trade deficit of approximately $9 billion – up by 1.6% on the deficit in 2013.

According to the ministry of finance, exports to Asia have been particularly strong and sales to China were up by 15%.

A significant factor in Japan’s balance of trade deficit is the additional costs of fossil fuels (notably LPG) that Japan has needed to import to make up for shortfalls in electrical power generation with her nuclear capacity still mothballed after the March 2011 tsunami. These fuels (and raw materials in general) are priced in Dollars and so become dearer as the Yen falls.

Recent economic data has been poor and this has fueled speculation that the government may launch a new raft of stimulus measures. They also cast doubt on a planned increase of sales tax for next October which would see the tax rise to 15%. The rationale for this is that consumer spending may be too weak to withstand the planned hike.