TOKYO: Japan’s exports slipped for an eighth month in July, while manufacturers’ confidence turned negative for the first time in over six years as China-bound sales slumped again in a fresh sign the Sino-US trade war could tip the economy into recession.
The gloomy data underscored the challenge for Japanese policymakers worried that prolonged weakness in external demand will drive a sharp economic downturn at home.
Exports in July fell 1.6 per cent from a year earlier, Ministry of Finance data showed on Monday, dragged down by China-bound shipments of car parts and semiconductor production equipment. That compared with a 2.2 per cent decrease expected by economists.
It marked the longest run of declines in exports since a 14-month stretch from October 2015 to November 2016. Yet there was some glimmer of hope for shippers, as export volume rose 1.5 per cent in July year-on-year — the first positive reading in nine months. Separately, the Reuters Tankan survey showed Japanese manufacturers’ business confidence turned negative for the first time since April 2013 in August.
“My impression is that the year-on-year rise in the export volume was slightly stronger than expected. That’s a positive as falling exports is the biggest issue faced by the Japanese economy,” said Taro Saito, executive research fellow at NLI Research Institute.
“But it’ll be hard for exports to recover going forward, since there’s no solution in sight for the US-China trade war, and the global economy and manufacturing remain weak.”
Indeed, the negative reading underlined the darkening outlook for the Japanese economy even as the most recent quarter showed a welcome improvement. Gross domestic product grew faster than expected in April-June to mark the third straight quarter of expansion, as robust domestic consumption and business investment offset the negative contribution from external demand. Though service-sector activity remains firm in Japan, simmering international trade tensions have caused manufacturers’ sentiment to worsen.
Analysts at Capital Economics said they expect imports will continue to outpace exports as consumers are seen bringing forward demand ahead of a planned sales tax hike in October.
“The upshot is that net trade may remain a drag on growth in the third quarter,” the analysts wrote in a note to clients. — Reuters
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