TOKYO: Japan’s exports fell in July for the first time in nearly two-and-a-half years, dragged down by faltering demand for light oil and chip-making equipment, underlining concerns about a global recession as key markets like China weakened.
Ministry of Finance (MOF) data out Thursday (Aug 17) showed Japanese exports fell 0.3 per cent in July year-on-year, compared with a 0.8 per cent decrease expected by economists in a Reuters poll. It followed a 1.5 per cent rise in the previous month.
Separate data by the Cabinet Office showed a key gauge of capital expenditures rose in June. However, manufacturers are braced for core orders to slide during the current quarter, partly due to the impact of weak offshore demand.
Overall, the batch of data underscored the fragility in Japan’s export engine that helped underpin second quarter domestic product (GDP) growth, with car shipments and inbound tourism the biggest drivers.
Japanese policymakers are counting on exports to shore up the world’s No 3 economy and pick up the slack in private consumption that has suffered due to broader price hikes.
However, the spectre of a sharper global slowdown and faltering growth in its major market China have raised concerns about the outlook.
The concerns about global growth were underscored by separate data earlier showing persistent declines in Singapore’s exports, seen as a gauge of overseas demand as trade flows dwarf the city-state’s economy.
“China remains weak and I don’t see demand from Europe and America to accelerate further,” said Takeshi Minami, chief economist at Norinchukin Research institute, adding that Japan’s economy may suffer a downturn in the current quarter.
By destination, exports to China, Japan’s largest trading partner, fell 13.4 per cent year-on-year in July, due to drops in shipments of cars, stainless steel and IC chips, following a 10.9 per cent decline in June.
U.S.-bound shipments, Japan’s key ally, rose 13.5 per cent year-on-year last month to log the largest in value on record, led by shipments of electric vehicles and car parts, following an 11.7 per cent rise in the previous month.
GLOOMY OUTLOOK TO KEEP BOJ ON HOLD
“The Bank of Japan must be aware of downside risks from the global economy. Therefore, it would have no choice but to avoid any efforts to normalise monetary policy for the time being given the risk from external slowdown,” Minami said.
At its July meeting, the BOJ kept its yield curve control (YCC) targets unchanged but took steps to allow long-term interest rates to rise more freely in line with increasing inflation and growth.
Thursday’s data also showed imports fell 13.5 per cent in the year to July, versus the median estimate for a 14.7 per cent decrease.
The trade balance swung to a deficit of 78.7 billion yen (US$537.27 million), versus the median estimate for a 24.6 billion yen surplus.
Separate data showed Japan’s core machinery orders rose 2.7 per cent in June from the previous month.
Compared with a year earlier, core orders, a highly volatile data series regarded as an indicator of capital spending in the coming six to nine months, declined 5.8 per cent.
Manufacturers surveyed by the Cabinet Office forecast that core orders will fall 2.6 per cent in the July-September quarter, which taken together with the weakness in exports suggest rising pressure on Japan’s economy.
“On their own, the July trade figures still point to a small boost from net exports across Q3,” said Marcel Thieliant, head of Asia-Pacific at Capital Economics.
“But even if that were the case, GDP growth will surely slow sharply,” he added.
