The latest Standard Life Investments Global Perspective report said real goods and services exports only increased three per cent between the third quarter of 2012 and the third quarter of 2013.
Standard Life Investments chief economist Jeremy Lawson believes export growth will continue to underperform market expectations throughout 2014.
Mr Lawson said one of the reasons for this could be that firms are still adjusting to the elevated level of yen in the past four years and “initially using the yen depreciation to rebuild profit margins rather than expand export volumes”.
“Firms’ own expectations may also be playing a role,” he said. “Survey evidence suggests that many exporters still do not expect the sharp depreciation of the exchange rate to persist.”
Mr Lawson said it is more likely, however, that Japanese exports have become less responsive to global growth and the exchange rate.
“Since peaking in 1988, Japan’s share of global goods exports has declined 9.2 per cent to 4.3 per cent and over the past decade the country has lost market share every year apart from 2010.”
While some of this loss is due to the rise of China, Japan lost more market share than any other G20 country over the period, said Mr Lawson.
An improvement in global growth should help increase Japanese export growth in the next 12 months, but Mr Lawson believes the impact will be minimal.
He said the “sustained deterioration in Japan’s export market share” during both currency depreciation and appreciation indicates structural barriers have been at least equally responsible for the decline in exports.
Widespread structural reforms involving the tax system, labour markets, product market regulations and corporate governance are needed to increase competitiveness and boost the domestic economy, he said.
