Posted by: Dirk | August 19, 2013

Japan’s exports are rising, no: falling – wait – rising?

The success or no success of Japan’s expansionary policy mix (Abenomics) brings out the worst in the media. If Japan as a consequence of these policies can grow, it will be very obvious that austerity has been, is and will be completely stupid. The latest numbers published today at the Ministry of Finance (MOF) were interpreted in two different ways by Financial and New York Times. Here are the headlines with the first paragraph. The NY Times published the Reuters account, the FT its own reporting:

Weak Yen Works for Japan as Exports Rise

TOKYO — Japanese exports rose in July at the fastest annual pace in nearly three years, Ministry of Finance data released Monday showed, as the benefits of a weak yen started to take hold and brisk sales of cars and electronics to the United States, Asia and Europe showed a recovery in overseas demand.

Japan exports slide amid subdued demand

Japan’s exports slipped for the first time in eight months in July, as subdued demand in key markets such as the US and Asia offset the boost to manufacturers from a lower yen.

Now the original data sources are seasonally adjusted numbers for the FT (here) and absolute numbers for the NYT (here). Both articles are technically correct. However, by picking seasonally adjusted numbers the FT is picking a, well, very peculiar view. If you want to find out whether a change in policy – mostly, a weakening of the yen – has led to an increase in exports – both volume and value – you would expect to look at the nominal numbers, which the NYT does. Both are rising. The FT’s methodology is not sound. It is like saying that from November to December Xmas tree sales are down because seasonally adjusted the numbers have shown a decrease. All the action is in your seasonal adjustment variable and therefore the reader will find it impossible to make his or her own judgement.

If there is a change in policy, it is wrong to assume that seasonal adjustment can be used as in business as usual. Business is not as usually, so the right thing to do is to use year-on-year numbers. In the case of Japan business seems to have been exceptionally good, as the NYT reports:

The 12.2 percent increase in exports compared with July last year was less than a median estimate for a 13.1 percent increase in a poll of analysts by Reuters, but was the biggest gain since December 2010.

Exports to the United States, Asia and Europe all accelerated. Export volume also rose for the first time in more than a year, offering more evidence that overseas demand could strengthen further.


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