TOKYO- Japan’s annual exports grew much less than expected in June, highlighting weak Chinese and Western demand that continues to undercut the post-COVID recovery in the world’s third-biggest economy.
The risk of a world recession amid sweeping monetary policy tightening since last year has cast a pall over export-led economies, with many countries including Japan relying on domestic consumption to underpin growth.
The trade data, released by the Ministry of Finance (MOF) on Thursday, showed exports rose 1.5 percent year-on-year last month, below the 2.3 percent gain expected by 15 economists in a Reuters poll, but faster than a 0.6 percent rise in May.
Exports were led by US-bound shipments of cars and mining machinery, while China-bound shipments of steel, chips and nonferrous metal caused a double-digit decline in overall exports to China.
“The effects of US and European rate hikes aimed at curbing demand and inflation will persist from now on, while the Chinese economy is struggling despite some stimulus steps, all of which deprive the global economy of a growth engine,” said Takeshi Minami, chief economist at Norinchukin Research Institute.
“Going forward, it could be hard for Japan to maintain a trade surplus in a stable manner unless exports regain strength and global commodity prices keep import costs low.”
Imports fell 12.9 percent year-on-year in June, versus the median estimate for a 11.2 percent decrease. The decline in the value of imports, caused by drops in crude, coal and liquefied natural gas, should help ease concerns about rising costs of purchases.
The overall trade numbers produced a trade surplus of 43 billion yen ($308.11 million), confounding the median estimate for a 90.1 billion yen deficit.
A weak yen and surging import costs have led to nearly two years of trade deficits in Japan, another challenge for policymakers hoping to shore up a fragile recovery following the end of COVID curbs.
By region, exports to China, Japan’s largest trading partner, fell 11 percent year-on-year last month, due to drops in shipments of steel, chips and nonferrous metal, following a 3.4 percent decline in May.
US -bound shipments, Japan’s major ally, rose 11.7 percent year-on-year in June, led by shipments of cars, construction and mining machinery, following a 9.4 percent rise in the previous month.
Japan’s economy grew more than initially thought in January-March as a post-pandemic pickup in domestic spending and company restocking helped offset the hit to exports from slowing global demand.
With inflation running at a four-decade high, further growth in the world’s third-largest economy will depend on sustained wage hikes, which the Bank of Japan and the government regard as core policy objectives.
Japan’s gross domestic product (GDP) expanded an annualized 2.7 percent in January-March, much higher than a preliminary estimate of a 1.6 percent growth and economists’ median forecast for a 1.9 percent rise.
The figures also revised out a technical recession reported for the second half of last year, defined as two consecutive quarters of contraction. The revised data showed GDP rose 0.4 percent in October-December, following a 1.5 percent contraction in July-September.
The January-March expansion translates to a 0.7 percent quarter-on-quarter rise, data released by the Cabinet Office showed, against a preliminary reading of 0.4 percent and economists’ forecast for a 0.5 percent increase.
Companies’ work-in-progress inventories, particularly among automakers and semiconductor equipment firms, and capital expenditure rose faster than previously reported, contributing to the upward GDP revision, a government official told a press briefing.
Capital spending rose 1.4 percent, upgraded from 0.9 percent and roughly in line with Ministry of Finance data last week that showed manufacturers’ business spending grew at the fastest rate since 2015.
Private consumption, which makes up more than half of Japan’s GDP, grew 0.5 percent, revised down slightly from an initial estimate of a 0.6 percent increase.
Domestic demand as a whole contributed 1.0 percentage point to the revised first-quarter GDP growth, more than initially estimated.
Meanwhile, net exports detracted 0.3 of a percentage point, in line with preliminary estimates. Although separate data on Thursday showed Japan logged current account surplus in April for a third straight month, export growth was at a two-year low. -Reuters
