— Imports Surge on Energy, Vaccines, Leading to 2nd Straight Trade Deficit
By Max Sato
(MaceNews) – Japanese exports stayed above the level seen a year earlier in September but the pace of increase continued decelerating as carmakers and electronics firms cannot meet reopening demand amid worsening global supply chain disruptions, data released Wednesday by the Ministry of Finance showed.
As seen in recent months, demand for Japanese iron and steel as well as semiconductors and other electronics parts was solid while global chip shortages and delayed parts supplies from Southeast Asia dampened production and shipments of automobiles.
Higher energy costs and Covid-19 vaccine imports resulted in the second straight month of a trade deficit in September, with the negative gap narrowing slightly from August.
The key points from the MOF’s Trade Statistics:
* Exports rose 13.0% in September for the seventh year-over-year rise in a row but the pace of increase decelerated further from 26.2% in August, 37.0% in July and 48.6% in June. It was the slowest pace during the current period of double-digit percentage gains that began in March. The latest figure came in higher than the median economist forecast of an 11.0% rise.
* The increase was led by iron and steel, mineral fuels and electronics parts, reflecting demand from reopening economies. By contrast, shipments of automobiles plunged 40.3% on year after rising earlier this year.
* On a seasonally adjusted basis, exports dipped 3.9% in September from the previous month, the MOF said. The Bank of Japan’s real export index slumped a seasonally adjusted 3.7% on month in August, the first drop in three months after +1.6% in July. In July-August, the index was flat (-0.0%) on quarter after rising 3.4% in April-June for the fourth consecutive rise. The BOJ will release its real trade indexes for August at 1400 JST (0500 GMT) Thursday.
* Imports rose 38.6% on year in September, the eighth straight rise after gaining 44.7% in August, 28.5% in July and 32.8% in June. The pace of increase exceeded the median economist forecast of a 34.4% rise. Higher imports were led by crude oil and coal amid a general uptrend in energy prices. Japan has been slow to develop and approve its own Covid-19 vaccines and thus still needs to purchase more from the U.S. and Europe.
* The trade balance came to a deficit of Y622.8 billion in September, marking the second straight month of a shortfall after a deficit of Y637.2 billion (revised from Y635.4 billion) the previous month. The gap was wider than the consensus call of a Y519.2 billion deficit.
* For the first half of fiscal 2021 ending March next year, exports were up 34.2% on year and imports gained 30.3%, both much higher than in the previous six-month period. The trade balance for April-September was a deficit of Y389.8 billion following a surplus of Y2.5 trillion in the second half of fiscal 2020.
* Exports to China, the top export destination for Japan, remained solid, up 10.3% from a year earlier in September for the 15th consecutive y/y rise, with the pace of increase decelerating from 12.6% in August, 18.9% in July and 27.7% in June. The increase was led by healthy demand for electronics parts, plastics and organic compounds (cosmetics), as seen in recent months.
* Japanese exports to Asia as whole marked the seventh straight year-on-year rise, up 21.3%, with the pace of growth also slowing from 26.1% in August, 32.5% in July and 37.1% in June.
* Exports to the U.S., another key market, recorded the first year-on-year drop in seven months, down 3.3% in September after rising 22.8% in August, 26.8% in July and surging 85.7% in June. The decrease was led by automobiles, aircraft and batteries while shipments of chip-making equipment, engines and mineral fuels.
* Shipments to the European Union posted the seventh straight year-on-year rise, up 12.1% on year after gaining 29.9% in August, 46.1% in July and 51.1% in June, backed by demand for organic compounds, non-ferrous metals and optical equipment including fiber scopes and steppers (motors for electronic devices).
Japan Economic Recovery Faces Challenges
Last week, Japan’s government maintained its cautious view on the pace of domestic economic recovery as global supply chain disruptions linger, according to its monthly report. The economy continues to show “movements of picking up” despite severe conditions caused by the pandemic, although “its pace has weakened,” it said after revising down its overview for the first time in four months in September.
The government downgraded its view on exports for the first time in seven months, saying they are “increasing at a slower pace.” In its previous statement, it said exports showed “a continued increase at a slow pace.”
Japanese shipments to the world have recovered to pre-pandemic levels. The Cabinet Office export volume index was at 105.7 in August, compared to 100 in January 2020, but it dipped 0.7% from July, indicating a slower pace of recovery due to lower availability of vehicles.