By Max Sato
(MaceNews) – The year-on-year rate of decline in Japanese exports slowed again in September as demand for some goods is picking up amid slowly reopening businesses in parts of the pandemic-hit global economy, trade data released Monday by the Ministry of Finance showed.
The key points:
* Exports marked the 22nd straight year-on-year drop in September, down 4.9% y/y, hit by double-digit percentage declines in shipments of steel products, mineral fuels and ships, but the pace of decrease decelerated from -14.8% in August, -19.2% in July and -26.2% in June. The latest figure was weaker than the median forecast by economists polled by Reuters of a 2.4% decrease.
* Economists estimate that the month-to-month change in real exports – a key indicator for the recent trend – recorded a third straight month of increase on a seasonally adjusted basis, boding well for the wobbly Japanese economy. The Bank of Japan’s real export index continued to trend upward in recent months, up a seasonally adjusted 6.5% m/m in August (September data are due later Monday).
* Imports fell 17.2% y/y in September for the 17th consecutive decrease, mainly due to lower prices for oil and gas compared to year-earlier levels as well as slower demand for smartphones. The pace of decline decelerated from -20.8% in August and was slower than the median forecast of -21.4%.
* The trade balance came to a surplus of Y675.0 billion in September, posting the third straight monthly positive figure, after a surplus of Y248.6 billion the previous month. It was narrower than the median economist forecast of a Y989.8 billion surplus.
* Exports to China jumped 14.0% from a year earlier in September after a 5.1% rise in August for the third consecutive monthly rise, backed by solid demand for non-ferrous metals, semiconductor-making machines and automobiles. Those to Asia posted the seventh straight monthly drop but the pace of y/y decline decelerated to -2.0% from -7.8% the previous month. The decrease was due to slower shipments of steel products, organic compounds (cosmetics) auto parts.
* Exports to the U.S. showed signs of a pickup, rising 0.7% in September and marking the first y/y gain in 14 months after falling 21.3% in August. The slight increase was led by demand for automobiles, heavy electrical machinery (turbines, etc.) and medicine. By contrast, exports to the EU slumped 10.6% y/y, down for the 14th month in a row, hit by slower shipments of engines, automobiles and metalworking machines. The pace of decline slowed from a 19.2% drop in August, however.
Japan’s economic outlook:
* Both the government and the Bank of Japan have noted in their recent reports that Japanese exports have been “picking up,” backed by recovering demand in some economies. They expect the domestic economic pickup to continue but are warning about the drag from rising coronavirus cases in many parts of the world.
* The Japanese economy is being supported by gradual month-to-month gains in exports and industrial production, said Akiyoshi Takumori, chief economist at Sumitomo Mitsui DS Asset Management. Exports account for about only 15% of nominal gross domestic product in Japan, but given an expected drop in imports in the July-September quarter, external demand (exports minus imports) is estimated to have pushed up the Q3 GDP (data due on Nov. 16) by 2 percentage points quarter on quarter, or an annualized 8%, he said. However, Takumori warned that consumer spending may post only a slight gain, which would not be strong enough to offset a continued decline in business investment.