By Mas Sato
(MaceNews) – Japanese exports recorded the first year-on-year gain in just over two years, as largely expected, thanks to a recent gradual pickup in global demand, but the outlook for one of the key growth drivers for slow domestic recovery remains uncertain amid a surge in new coronavirus cases in many parts of the world, data released Thursday by the Ministry of Finance showed.
The Japanese government will release its monthly economic report on Friday, in which it is expected to maintain its overall assessment that the economy is “showing signs of a pickup.” Last month, the government revised up its view on exports for the first time in two months, saying they were “increasing,” instead of “picking up.”
Economists on average forecast Japan’s gross domestic product to show a 3.73% annualized growth in the last quarter of 2020 (official data due on Feb. 15), slowing from a 22.9% rebound in July-September after a 29.2% slump in April-June, according to the latest survey of 36 economists in the ESP Forecast conducted by the Japan Center for Economic Research from Dec. 25 to Jan. 7.
Those economists on average predict that the economy will contract again, by 0.99% annualized, in January-March, as rising coronavirus cases and government restrictions on economic activity is expected to dampen consumer spending while business investment and exports are likely to lose some steam.
The key points from the MOF’s Trade Statistics:
- Exports rose 2.0% on year in December, coming in slightly softer than the median economist forecast of a 2.4% increase. It was the first y/y gain in 25 months following a 4.2% drop in November and double-digit percentage drops in recent months. The increase was led by higher shipments of plastics, non-ferrous metals and semiconductor-producing equipment. Exports of mineral fuels, automobiles and steel products slipped in December. U.S. demand for Japanese cars remained solid but the pandemic has slashed Europe’s appetite for importing vehicles.
- For the whole of 2020, Japanese exports slumped 11.1% from the previous year, posting the second straight annual decline after -5.6% in 2019 and +4.1% in 2018, reflecting slower demand for cars, car parts and mineral fuels.
- Economists estimate that the month-to-month change in real exports – a key indicator for the recent trend – appeared to have remained on a gradual uptrend. The Bank of Japan’s seasonally adjusted real export index rose 3.7% in November for the sixth straight month-on-month rise, with the rate of increase decelerating from +4.5% in October. (The BOJ’s December real trade data are due at 1400 JST/0000 EST Thursday).
- Imports slumped 11.6% y/y for the 20th consecutive decrease in December after -11.1% in November, mainly due to lower prices for oil and gas, compared to year-earlier levels, as well as slower demand for aircraft. The median forecast was for -14.0%. In 2020, imports also marked the second straight annual drop, down 13.8%, after -5.0% in 2019 and +9.7% in 2018 in light of lower energy prices.
- The trade balance came to a surplus of Y751.0 billion in December, posting the sixth straight monthly positive figure, after a surplus of Y366.1 billion the previous month. The gap was narrower than the median economist forecast of a Y942.8 billion surplus. For the whole of 2020, Japan’s trade balance came to a surplus of Y674.7 billion, the first surplus in three years, after chalking up a deficit of Y1.67 trillion the previous year.
- The MOF said exports dipped a seasonally adjusted 0.1% on month in December and imports gained 1.3% m/m, resulting in a lower trade surplus of Y477.1 billion.
- Exports to China jumped 10.2% from a year earlier in December for the sixth consecutive y/y rise, following +3.8% in November and +10.2% in October. The increase was led by strong demand for plastics, non-ferrous metals and raw materials.
- Japanese exports to Asia as whole rebounded, up 6.1% on year after -4.3% in November and +4.4% in October, thanks to solid demand for semiconductor-producing equipment, non-ferrous metals and plastics.
- Among soft spots in the trade data are exports to the U.S., which marked the second consecutive y/y drop, down 0.7% last month, after falling 2.5% the previous month. While demand for Japanese autos and auto parts continued to rise, shipments of aircraft, chip-making machines and mineral fuels declined.
- Exprts to the EU fell 1.6% for the 17th consecutive y/y decrease after falling 2.6% in November and marking double-digit percentage declines in prior months. The decrease was led by slower shipments of automobiles, engines and motorcycles. Exports of construction machinery, auto parts and scientific and optical instrument increased on year.
Contact this reporter: max@macenews.com
Content may appear first or exclusively on the Mace News premium service. For real-time delivery, contact tony@macenews.com. Twitter headlines @macenewsmacro.