Impact of falling terms of trade on Japan’s growth and deflation
Japan’s terms of trade, which saw steady deterioration until the mid 2010s, have since trended sideways, albeit with substantial fluctuation. The decline reflects Japan’s extreme dependence on imported resources and a drop in export prices amid intensifying global competition.
What you will learn:
- Deteriorating terms of trade has been one of the sources of Japan’s long-term growth stagnation and disinflation. Worsening trading gains have steadily driven down real gross domestic income (GDI) further from already stagnant gross domestic production (GDP).
- From 2005 to 2012, the terms of trade drove down a GDP deflator sharply, delaying a return to positive growth even after the economy had completed the balance-sheet adjustment following the bursting of Japan’s bubbles.
- GDI has been squeezed again due to last year’s commodity price rise, and a GDP deflator continued to decline in 2021. Should commodity prices remain high, the risk of Japan falling into a deflationary trap will become elevated.
Tags:
Related research
Post
The Green Leap ‒ Dismayed battlelines drawn at COP29
The 29th Conference of the Parties (COP29) concluded with the announcement of a new core climate finance target to assist developing nations. Although a step in the right direction, this target for funding from wealthy nations to the developing world was slammed by many as insufficient to cover the substantial costs associated with climate mitigation and adaptation efforts in the developing world.
Find Out More
Post
France on the brink drives spreads to crisis highs
The spread between French and German government bonds has reached its highest level since the height of the eurozone sovereign debt crisis in 2012, as Prime Minister Michel Barnier's government appears increasingly likely to be toppled over the 2025 budget.
Find Out More
Post
Industry Forecast Highlights: Industry dynamics driven by Trump 2.0 policies
Our latest global industry forecasts reflect the impact of a second Trump presidency on industrial sectors. The US industrial forecast is now upgraded over the next two years, reflecting the impact of corporate tax cuts, with capital goods sectors expected to benefit most.
Find Out More