Japan's economic recovery hindered as the export growth slows

Photo: Reuters

In September, Japan's export growth slowed to its worst in seven months, adding to concerns that pandemic-related global supply chain bottlenecks might undermine the country's nascent economic recovery.

Exports are slowing at a time when a lower yen and rising oil prices have raised import costs, harming resource-scarce Japan's terms of trade and jeopardizing Prime Minister Fumio Kishida's commitment to narrow wealth inequalities.

When the Bank of Japan announces new quarterly growth and inflation estimates at its policy meeting later this month, the trade data will be one of the variables scrutinized.

Exports increased 13.0 percent from a year ago in September, according to Ministry of Finance statistics released on Wednesday, compared to a median market expectation of 11.0 percent growth, while vehicle shipments fell 40.3 percent, the first decline in seven months.

Export growth slowed from 26.2 percent in the previous month to the weakest since February, although being ahead of expectations.

"While the effect of auto production cuts will abate once supply bottlenecks are resolved, fundamental concerns for growth peak-outs in the United States and China are unchanged," Economist at Daiwa Securities said to Reuters.

"Exports will still be in the weak state for a while," he was further quoted.

In September, shipments to China, Japan's largest trading partner, increased 10.3% year on year, with semiconductors and plastic materials leading the way, while vehicle exports plummeted 71.9 percent.

Exports to the United States, another important market for Japanese goods, dropped 3.3 percent, the first drop in seven months, as demand for automobiles and planes declined.

Imports, however, climbed 38.6% in the year to September, following a 44.7 percent spike the month before, mainly to higher expenses for oil, coal, and pharmaceuticals.

Imports have now climbed for eight months in a row, raising fears that the yen's recent weakness and rising oil prices are raising the cost of living in Japan.

"Rising import prices hurt the terms of trade for Japanese companies," Ryosuke Katagi, market economist at Mizuho Securities said according to Reuters. "As consumer price inflation remains stagnant in Japan, companies cannot pass on the soaring costs to consumers, damaging corporate profits."


With the yen-based cost of imports at its highest since November 2018, Japan's trade balance swung into a deficit for the second month in a row, totaling 622.8 billion yen ($5.43 billion).

The statistics may add to policymakers' concerns about an export-led recovery, while growing import costs may raise fears of stagflation, or rising inflation combined with stagnant GDP.

Despite extra stresses from a recurrence of the epidemic in other areas of Asia, policymakers are under pressure to sustain Japan's economic recovery from last year's influenza-induced doldrums.

According to a poll, Japan, also the third-largest economy of the world, has grown a meager 0.8 percent in the third quarter, as automakers struggled with component shortages and supply limitations caused by Asian manufacturing shutdowns.

Publish : 2021-10-20 09:47:00

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