Japan’s exports slump for tenth straight month

Japan‘s exports contracted for a 10th straight month in September, adding to speculation the central bank could make it easier to borrow money as soon as next week to support an economy hit by a slowdown in global demand.

A bitter United States–China trade war and slowing economic growth in China have heightened the risks of a global recession, darkening the outlook for Japan’s economy, the world’s third-largest.

Exports in September slumped 5.2 percent from a year earlier, Japan’s finance ministry data showed on Monday, dragged down by slowing sales of car and aeroplane parts to the US and semiconductor production equipment to South Korea, with which Japan is embroiled in a trade dispute.

The fall was larger than a four percent drop expected by economists and marked the longest run of declines in exports since a 14-month stretch from October 2015 to November 2016.

In volume terms, exports fell 2.3 percent in the year to September, the second consecutive month of declines.

The extended fall in exports comes after the government lowered its assessment of the economy on Friday, raising a warning flag over weakness in exports.

Some analysts say the drop in exports could prompt the government and central bank to introduce measures to stimulate the economy.

“There is a possibility that there will be another fall in exports hereafter,” said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance.

“Though overall conditions are currently stable, it would become a factor for monetary easing if it did affect Japan’s economy as a whole.”

Markets are rife with speculation the Bank of Japan (BOJ), Japan’s central bank, could cut interest rates at its October 30-31 meeting, after it said at its rate review last month it would take a more thorough look at whether rising overseas risks could derail Japan’s fragile economic recovery.

The BOJ will “certainly” reduce short to medium-term interest rates if it needed to ease monetary policy, Governor Haruhiko Kuroda told the Reuters news agency on Saturday.

By region, exports to China, Japan’s biggest trading partner, slipped 6.7 percent year-on-year in September, down for the seventh month as shipments of auto parts declined, offsetting a rise in those of electronic chips for semiconductors.

Exports to Asia as a whole – which account for more than half of Japan’s total exports – dropped 7.8 percent in the year to September, falling for the 11th month, hurt by an 18.7 percent slide in semiconductor manufacturing parts, especially to South Korea.

Japan’s exports to the United States fell 7.9 percent in the year to September, weighed down by reduced shipments of cars with larger engines, and aircraft motors and parts.

Imports from the US slipped 11.6 percent in September, causing Japan’s trade surplus with the world’s top economy to narrow by 3.5 percent from a year earlier to 564.1 billion yen ($5.2bn), the trade data showed.

Washington and Tokyo signed a limited trade deal last month that cuts tariffs on US farm goods, Japanese machine tools and other products while further reducing the threat of higher US car duties.

“Going forward, imports are going to decline as consumption will be hurt” by the tax hike, said Takeshi Minami, chief economist at Norinchukin Research Institute.

“The trade deficit is likely going to be reduced over the coming months.”

The trade balance came to a deficit of 123.0 billion yen ($1.13bn), versus a 54 billion yen ($500m) surplus seen by economists.