— Imports Up on Rising Energy Costs, Leading to 3rd Straight Trade Deficit
By Max Sato
(MaceNews) – Year-on-year growth in Japanese exports continued to lose momentum in October as Covid-triggered delays in parts supply from Southeast Asia, microchip shortages and congestion at international ports have forced carmakers and others to trim output and shipments, data released Wednesday by the Ministry of Finance showed.
Rising costs of imported oil and gas led to the third straight month of a trade deficit in October but the negative gap narrowed substantially from September.
Shipments of automobiles are unlikely to return to normal yet. Toyota Motor last month said it would continue reducing global output in November while indicating it could rev up production in December.
In a speech to business leaders, Bank of Japan Governor Haruhiko Kuroda on Monday warned that there is a risk of supply-side constraints being “prolonged globally by more than expected,” which would “bring about deceleration in overseas economies and cost increases and thereby negatively affect Japan’s exports and corporate profits.”
The key points from the MOF’s Trade Statistics:
* Exports rose a solid 9.4% in October for the eighth year-over-year rise in a row but the pace of increase decelerated further from 13.0% in September, 26.2% in August, 37.0% in July and 48.6% in June. It was the weakest growth after seven months of double-digit percentage gains and a decline in February (distorted around the Lunar New Year holidays). The latest figure came in lower than the median economist forecast of a 9.9% rise.
* The increase was led by solid reopening demand for iron and steel, semiconductor-making equipment and mineral fuels. By contrast, shipments of automobiles to the U.S., Europe and Asia continued sliding from a year earlier.
* On a seasonally adjusted basis, exports rose 2.7% in October from the previous month, the MOF said. The Bank of Japan’s real export index slumped a seasonally adjusted 6.5% on month in September for the second straight drop. In the July-September quarter, the index dipped 2.8% on quarter after rising 3.4% in April-June for the first drop in five quarters. The BOJ will release its real trade indexes for October at 1400 JST (0500 GMT/0000 EST) Wednesday.
* Imports rose 26.7% on year in October, the ninth straight rise after gaining 38.2% in September, 44.5% in August, 28.1% in July and 32.5% in June. The pace of increase was slower than the median economist forecast of a 31.9% rise.
* The increase was led by crude oil, coal and liquefied natural gas amid rising energy prices. Japan depends on Covid-19 vaccines produced in Europe and the U.S. but imports of drugs showed a much slower pace of a 12.4% increase on year in October vs. an 84.2% surge in September. The share of fully vaccinated adults in Japan has surpassed those in most of Europe and the U.S.
* The trade balance came to a deficit of Y67.4 billion in October, marking the third straight month of a shortfall after a deficit of Y624.1 billion (revised from Y622.8 billion) the previous month. The gap was much narrower than the consensus call of a Y310.0 billion deficit.
* Exports to China, the top export destination for Japan, remained solid, up 9.5% from a year earlier in October for the 16th consecutive y/y rise, with the pace of increase decelerating from 10.3% in September, 12.6% in August, 18.9% in July and 27.7% in June. The increase was led by demand for chip-making machines, semiconductors and non-ferrous metals.
* Japanese exports to Asia as whole marked the eighth straight y/y rise, up 15.0%, with the pace of growth also slowing from 21.3% in September, 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 rise in two months, up a slight 0.4% in October after falling 3.3% in September, rising 22.8% in August and 26.8% in July and surging 85.5% in June. The increase was led by chip-making equipment, construction and mining machinery as well as iron and steel.
* Shipments to the European Union posted the eighth straight year-on-year rise, up 12.1% on year after gaining 12.1% in September, 29.9% in August, 46.1% in July and 51.1% in June, backed by demand for iron and steel, metalworking machines and optical equipment, which includes fiber scopes and steppers (motors for electronic devices).