Sliding Japan exports, manufacturing gloom heighten economic risk

Slowing global growth, trade wars and an export row with South Korea hit Japan's export-driven economy.

    Japan's exports were battered in June as a trade row with South Korea deepened and Trump puts pressure on Tokyo to accept US farm produce and curb car exports to the US [Reuters]
    Japan's exports were battered in June as a trade row with South Korea deepened and Trump puts pressure on Tokyo to accept US farm produce and curb car exports to the US [Reuters]

    Japan's exports fell for a seventh straight month in June, pressured by China-US trade frictions, slowing China growth and rising trade protectionism, as manufacturers' business confidence hit a three-year low.

    Exports have been a drag on the world's third-largest economy, weighing on factory output and threatening to undermine capital expenditure. Exports in June fell 6.7 percent from a year earlier, Ministry of Finance data showed on Thursday, dragged down by declining sales of tankers, China-bound car parts and steel pipes. That compared with a 5.6 percent decrease expected by economists and a 7.8 percent fall in May.

    Separately, the Reuters Tankan survey showed Japanese manufacturers' business confidence hit a three-year low in July, highlighting the fragility of the export-led economy.

    The batch of gloomy data underscored expectations among some analysts that the central bank will roll out more stimulus at its policy review later in the month. Bank of Japan officials have said they remain ready to ease further if economic conditions worsen, joining the US Federal Reserve in signalling additional monetary stimulus amid deteriorating global conditions.

    "The export picture should remain bleak in coming months," Robert Subbaraman, chief economist and head of global markets research, Asia ex-Japan at Nomura, wrote in a report.

    The economic strains showed no signs of abating as a lack of progress on US-China trade negotiations and heightened global uncertainty weighed on corporate spending.US President Donald Trump and Chinese President Xi Jinping agreed last month to another truce in the year-long trade row between the world's two largest economies, but no deadline has been set for the negotiations to conclude.

    Adding to global trade uncertainties, Japan is in a deepening row with South Korea after Tokyo curbed exports of some materials used to make hi-tech equipment.

    By region, Japan's exports to the United States rose 4.8 percent in the year to June, up for the ninth-straight month, driven by semiconductor-making equipment and cars, the trade data showed. The increased US-bound shipments raise some concerns that Trump could pile pressure on Japan to curb its auto exports to the US and open its highly-protected agriculture market to fix what he calls unfair trade imbalances.

    Imports from the US fell 2.5 percent in the year to June, causing Japan's trade surplus with the world's biggest economy to increase 13.5 percent from a year earlier to 669.9 billion yen ($6.2bn), the data showed.

    Exports to China, Japan's biggest trading partner, tumbled 10.1 percent year-on-year in June, down for a fourth consecutive month. Asia-bound shipments, which account for more than half of Japan's overall exports, declined 8.2 percent in the year to June. Japan's overall imports fell 5.2 percent in the year to June, versus the median estimate for a 0.4 percent decline, bringing the trade balance to a surplus of 589.5 billion yen ($5.5bn), versus the median estimate for a 420.0 billion yen ($3.9bn) surplus.

    SOURCE: Reuters news agency