Solutions

Export Manufacturing in Japan and the U.K. Help National Economies Finish Year on a High

The resurgence in export manufacturing helped the economies of Japan and the UK end 2017 on a high note. Led by higher global demand and weaker currencies, exports from both nations grew at a record pace for the year and played a significant role in economic growth and recovery. As long as the global economy continues to recover over the near term, analysts expect exports from both countries to remain strong. The British manufacturing sector reported its highest output in nearly three decades and gains in Japan represent twelve straight months of consistent growth, stemming from an international need for Japanese manufactured goods.

A weak pound coupled with high demand from robust economies in the Eurozone helped the UK’s manufacturing sector become a bright spot to a sputtering British economy. Booked orders for motor vehicles, transport equipment, and mechanical engineering firms led to this strong growth. With the largest order books since 1988, Britain’s jobs are reappearing, and unemployment is at its lowest level since 1975. There is growing concern regarding the shortage of skilled workers caused by the decline in employment and new limits on immigration. The increased output is good for the economy, but the threats of cost pressure remain as the value of the sterling continues to support exporters through lower levels, and British manufacturers may also begin to feel inflationary pressure as output prices are expected to rise at an increasingly rapid pace over the next few months.

Just as a weaker pound helped to expand booked export orders for the UK, the same is true for the Japanese yen. Substantial global demand for steel, vehicles, power generating equipment, computers and computer parts and semiconductor machinery combined with the diminished currency value propelled Japan’s exports by over 16% percent from 2016. The world’s third-largest economy increased exports to the US by 13%, to Western Europe by 17%, and by 20% in all of Asia. Highlighting Japan’s exports gains were significant in China by 25% and 27% to Germany, as well as double-digit growth in all South East Asian countries. Even though the Yen may rise and weaken trade values, high demands for electronic goods throughout Asia and investment capital will further drive Japanese export volumes up next year.