Japan's March exports disappoint on strong yen

Tokyo

JAPAN'S exports rose less than expected in March due to a strong yen, raising some concern about the outlook for shipments on top of anxiety over Washington's criticism of the nation's large trade surplus with the US.

Wednesday's trade data comes during a two-day summit between US President Donald Trump and Japanese Prime Minister Shinzo Abe that threatens to put Japan in the crosshairs of Mr Trump's protectionist trade policies.

While the trade surplus with the US narrowed slightly by 0.2 per cent year on year to 623.1 billion yen (S$7.6 billion) in March, it was still sizeable enough to draw criticism from Mr Trump.

The backdrop of rising trade tensions, stoked by the bitter US-China tariff standoff, have roiled financial markets as investors worried about their impact on global growth. Growth in export-reliant Japan could be undermined in the event of a hit to world trade, or if the US seeks measures to lower its trade deficit with the world's third-biggest economy.

"Exports can continue to grow, because there is overseas demand for capital goods," said Yusuke Ichikawa, senior economist at Mizuho Research Institute. "We need to watch for risks posed by trade policy, because there is a sense Japan will have to make some concessions to the US." In March, the data showed shipments grew 2.1 per cent from the same period a year ago, below the 4.7 per cent annual increase expected by economists in a Reuters poll. In February, exports grew 1.8 per cent.

The yen was 6.3 per cent higher versus the dollar in March compared to the same period a year ago, finance ministry data showed. This weighed on the value of Japan's exports.

In volume terms, Japan's exports rose 1.8 per cent year on year in March, reversing a 2.1 per cent annual decline in February, a reason to not become overly pessimistic, Mr Ichikawa said. Exports in March were supported by an increase in shipments of cars, and semiconductor manufacturing equipment, the data showed.

Japan's exports to the US rose 0.2 per cent year on year, much slower than a 4.3 per cent annual increase in February.

Japan's exports to the European Union slowed sharply to a 0.3 per cent annual increase in March from an 11.5 per cent increase in February, which could raise some concern about demand from Europe.

In one positive sign, Japan's exports to China jumped 10.8 per cent in March from a year ago, rebounding from a 9.7 per cent decline in February as factories resumed operations after the Chinese New Year holidays.

Economists expect Japan's exports to expand at a slower pace than last year due to a tapering off in demand for semiconductors and electronic parts. REUTERS