- Japan’s exports fell 0.3% in July compared to a year earlier for the first time since February 2021.
- Japan’s imports fell 13.5% in July, the fourth consecutive monthly decline.
- Sayuri Shirai, a professor at Keio University, says exports to China and Asia are of particular concern.
Containers at a freight terminal at Honmoku Wharf in Yokohama, Japan, on Monday, June 19, 2023.
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Japan posted its first monthly drop in exports in more than two years, as weaker demand in its biggest trading partners in China and the rest of Asia dampened growth prospects in the world’s third-largest economy.
Exports declined by 0.3 percent in July compared to the previous year for the first time since February 2021, according to temporary data Released Thursday by the Japanese Ministry of Finance. Exports to Asia fell by nearly 37%, while exports to China shrank by 13.4% in the eighth consecutive monthly decline, underscoring the magnitude of the slowdown on the mainland.
“Fortunately at this moment, [the weakness in China exports] Sayuri Shirai, an economics professor at Keio University, told CNBC “Squawk Box Asia” Thursday.
Japan’s domestic demand showed no significant improvement, confirmed by imports, which fell 13.5% in July. The export and import figures were slightly better than expected, though Japan swung to a trade deficit of 78.7 billion yen ($539.6 million), well below the median estimate of a surplus of 24.6 billion yen.
Increased imports propelled temporary growth of 6% in Japan in the second quarter, although economists expect global demand to weaken in the second half of the year.
“I think for Japan Japan’s exports to China are 20% of their total exports and to Asia 50%, so we have to watch what happens in China,” Shirai said.
Chinese Premier Li Qiang said on Wednesday that the country will work towards achieving its economic goals for the year. His remarks came against the backdrop of a slew of economic data that fell short of expectations, prompting economists to warn that China may not be able to meet its 5% growth target.
Combined with faltering domestic demand, the Bank of Japan is unlikely to have the incentive to move away from its ultra-easy monetary policy aimed at reviving the economy.
The continued weakness of the Japanese yen is another concern, as the currency touched 146 yen per dollar.
Shirai said that the Bank of Japan’s intervention “could happen soon” because the Japanese yen is nearing 150 against the dollar, which is the level the Japanese Ministry of Finance has been at. Intervened With nearly $68 billion supporting the yen in September and October.
Separate data released by the Japanese government showed that core machinery orders – considered by some to be a leading indicator of capital spending although volatile – fell 5.8% in July from a year earlier.
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