China’s slowdown continued to have a drag on Japan’s exports, which rose by just 0.6% in September, the weakest growth for more than a year.
While the value of exports rose due to a weakened yen – one of the cornerstones of Abenomics – the volume fell by 3.9%, which represents a third straight decline. Perhaps the headline figure is the 3.5% fall in shipments to China, which is mainly due to falling sales in automotive parts and energy shipments.
Exports to the rest of Asia fell 0.9%, the first drop to the region for seven months according to the Japanese Ministry of Finance, pointing to sluggish economic growth across the continent.
Perhaps symbolically, given the breakthrough in negotiations for the Trans-Pacific Partnership (TPP) this month, exports to the US were up 10.4%, mainly due to increased car sales. This points to a recovery in consumption in the US, but in pure volume terms, the trade flow was down, again emphasising the impact a weak yen is having on Japan’s trade sector.
Furthermore, the continued slowdown in China raises questions as to the economic wellbeing of the North of Asia. Much has been written about the exposure of commodity exporters in the south (Malaysia, Indonesia), but the 5.5% growth forecast by the IMF for Japan, South Korea, Taiwan and Hong Kong is the lowest since 2008.
“Export growth fell short of expectations in September, and the trade deficit narrowed much less than anticipated,” says Marcel Thieliant, Japan analyst at Capital Economics. “Admittedly, the headline figures masked a rebound in export volumes, which rose 1.9% month on month last month. However, import volumes jumped by a larger 3.7%. The upshot is that import volumes once again outpaced export volumes last quarter. We estimate that net trade shaved off as much as 0.3 percentage points from GDP growth in Q3.”
So while Abenomics may arguably show some positive results in pure value terms, in real terms it isn’t, with Japan’s exports sector still disappointing analysts and officials alike. If the weakness persists, pressure for a further intervention from the Bank of Japan will rise, with the central bank already facing some pressure to ease policy in order to boost exports and inflation.