The value of exports decreased 0.8% in August from a year earlier, led by slumps in mineral fuel and chip-making machinery, the finance ministry reported Wednesday. Economists had forecast a 2.1% decline. Japan’s exports saw their first drop in more than two years in the previous month. They also slipped on a month-on-month basis in the latest data.
The slide in exports bodes ill for the economy as consumers and businesses pare back spending at home to limit domestic drivers of growth. The latest gross domestic product figures for the second quarter showed that the Japanese economy expanded largely on the back of overseas demand.
“Exports remain in a downtrend,” said Economist Koya Miyamae at SMBC Nikko Securities Inc. “The auto industry’s recovering with supply constraints easing, but other sectors are not doing well. Shipments to China and other parts of Asia are weak, weighing on overall exports.”
BloombergAmid ongoing rate hikes by other central banks, the world’s economy is continuing to show weakness, particularly in manufacturing, with the August Purchasing Managers’ Index remaining low in the US and Europe.
Imports also fell for the fifth straight month, down 17.8% from a year earlier, against economist expectations of a 20% decline.
The deepening falls in imports offer some respite for the country, which has been hit by cost-driven inflation for months. While the key inflation gauge has been above the Bank of Japan’s 2% target for over a year, Governor Kazuo Ueda has repeatedly said that the current price hikes are not sustainable as they are mostly led by inflated import costs.
Still, the decline also points to shrinking demand within Japan, a concern given the ongoing slowdown in overseas growth, particularly in China. Japanese exports to China continued to slide at a double-digit pace in August.
Further price pressures are also re-emerging, said Saisuke Sakai, senior economist at Mizuho Research & Technologies.
“The recent fall in the yen, coupled with the current rise in crude oil prices, will likely push up import costs,” he said. “There is a strong concern that these factors will lead to higher prices in the near term.”
For Wednesday’s trade data, the average exchange rate was 142.23 yen against the dollar, 5.3% weaker than a year ago. The yen has weakened again recently as the policy gap between Japan and its peers remains large. The finance ministry’s top currency official Masato Kanda essentially gave a fresh reminder that authorities stand ready to intervene in foreign exchange markets if swings in the yen become excessive.
He said Wednesday he’s keeping in extremely close contact with his counterparts in the US on a day-to-day basis, and both sides agree that excessive currency moves are unwelcome.
