Japan's Recovering Economy Is Relying Heavily on China
By JAMES BROOKE
TOKYO, Nov. 20 - Japan and the United States both complain that China's currency is undervalued, but while Americans watch their trade deficit with China balloon to record levels, Japan announced on Thursday a 27.8 percent increase in its exports to China.
Japan's monthly deficit with China shrank in October by 21 percent, to slightly less than $2 billion. And when Japan's trade with Hong Kong is figured in, that deficit turns into a $778 million surplus for the month.
"The whining about the yuan has died down quite a bit because exports are going like a train," Peter J. Morgan, chief economist for HSBC, said of complaints heard in Japan last month about China's long-fixed exchange rate.
With China and Hong Kong snapping up Japanese steel, cellphone parts, video game parts and liquid-crystal display panels, sales to China and Hong Kong accounted for 63 percent of Japan's export growth last month. By contrast, Japan's exports to the United States fell by 6.2 percent, the 10th consecutive month of decrease.
Exports to the United States have fallen partly because Japanese car companies increasingly build their cars in the United States, rather than send them across the Pacific on ships. In addition, the yen has strengthened by 10 percent against the dollar since July, closing on Thursday at 107.5 yen to the dollar.
"China remains the source of most of the export growth," wrote Richard Jerram, an economist for ING Financial Markets. With China now the world's largest exporter to Japan, he wrote, "Japan's dependence on the U.S. has just been replaced by a broader dependence on China and the U.S."
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