Japan’s exports fall for 8th straight month



TOKYO: Japan’s exports slipped for the eighth month in July, while manufacturers’ confidence turned negative for the first time in over six years as China-bound sales slumped again in a fresh sign that the Sino-US trade war could tip the economy into recession. The data underscored the challenge for Japanese policymakers worried that prolonged weakness in external demand would drive a sharp economic downturn at home.

Exports last month fell 1.6 per cent from a year earlier, Ministry of Finance data showed yesterday, dragged down by China-bound shipments of car parts and semiconductor production equipment. That compared with a 2.2 per cent decrease expected by economists.

It marked the longest run of declines in exports since a 14-month stretch from October 2015 to November 2016. Yet there was a glimmer of hope for shippers as last month’s export volume rose 1.5 per cent year on year – the first positive reading in nine months.

Separately, survey showed Japanese manufacturers’ business confidence turned negative this month for the first time since April 2013. My impression is that the year-on-year rise in the export volume was slightly stronger than expected. That’s a positive as falling exports is the biggest issue faced by the Japanese economy, said Taro Saito, executive research fellow at NLI Research Institute.

“But it’ll be hard for exports to recover going forward, since there’s no solution in sight for the US-China trade war, and the global economy and manufacturing remain weak,” he added.


Indeed, the negative reading underlined the darkening outlook for the Japanese economy even as the most recent quarter showed a welcome improvement.

Gross domestic product grew faster than expected in April-June to mark the third straight quarter of expansion, as robust domestic consumption and business investment offset the negative contribution from external demand. Though service-sector activity remains firm in Japan, simmering international trade tensions have caused manufacturers’ sentiment to worsen.

Analysts at Capital Economics said they expect imports will continue to outpace exports as consumers are seen bringing forward demand ahead of a planned sales tax hike in October. “The upshot is that net trade may remain a drag on growth in the third quarter,” the analysts wrote in a note to clients. Anxiety about a global slump rose to fever pitch after an inversion in the US Treasury yield curve implied a growing risk of a recession there, and data showed Germany’s economy was in contraction and China’s was worsening.

Exports to China, Japan’s biggest trading partner, shrank 9.3 per cent year on year last month, down for the fifth month. The contraction was led by sizeable declines of 31.5 per cent in semiconductor production equipment, 35 per cent in car parts and 19 per cent in electronics parts, the data showed. Manufacturers’ exports to China of semiconductors and electronics parts slumped as a rush of demand ahead of a US ban on federal purchases of telecommunications equipment from Huawei Technologies wound down, analysts said.

Shipments to Asia, which account for more than half of Japan’s overall exports, declined 8.3 per cent in the year to July. Export-reliant economies such as Japan have been hit hard by the Sino- US tariff row, which has already upended supply chains and undermined global trade, investment and corporate earnings. Japan has also been embroiled in an intensifying trade row with South Korea, further threatening to hurt the outlook for its manufacturers.

Japan’s exports to the United States rose 8.4 per cent in the year to July, driven by a jump in semiconductor production equipment, construction and mining machinery and airplanes. It marked the 10th straight month of exports growth to the US, following a 4.9 per cent increase in June. Imports from the US climbed 3.5 per cent last month, sending Japan’s trade surplus with the world’s biggest economy up 15.6 per cent from a year earlier to 579.4 billion yen (S$7.5 billion), the data showed.

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