Japan's November export growth slows to 0.1% on trade war concerns

Tokyo

JAPAN'S export growth slowed to a crawl in November as shipments to the United States and China weakened sharply, in a sign that slowing external demand and a Sino-US trade dispute may leave the world's third-largest economy underpowered over the next year.

The 0.1 per cent year-on-year rise in exports undershot a 1.8 per cent annual increase expected by economists in a Reuters poll, and was well below an 8.2 per cent jump in October. In volume terms, exports fell 1.9 per cent in the year to November.

The trade data highlights rising external risks for Japan's export-led economy, and comes as the Bank of Japan reviews its policy at a two-day meeting that ends on Thursday.

With consumer inflation remaining weak, and as global economic momentum cools, the BOJ is widely expected to maintain its current ultra-easy policy.

Analysts expect exports to be a drag on the economy over the coming quarters as external demand ebbs. Policymakers are also wary of the risks to growth from the China-US trade war, which many believe have yet to play out in Japan's shipment figures.

"Japan's export volume is slow to expand against the backdrop of global economic slowdown," said Toru Suehiro, senior market economist at Mizuho Securities. "Uncertainty over the world economy remains strong. As such, Japan's exports will struggle to pick up for the time being."

Japan's exports to the US grew 1.6 per cent year-on-year in November, led by shipments of airplane motors and semiconductor production equipment, slowing sharply from October's 11.6 per cent jump. US-bound auto exports fell 7 per cent to 163,586 units.

US President Donald Trump has criticised Japan as well as China over trade, threatening to impose steep tariffs on imports of Japanese cars, which make up about two-thirds of Japan's US$69 billion annual trade surplus with the US.

Mr Trump's hostile trade policies significantly aggravated Japan's popular perception of the country's ties with the US this year, an annual opinion poll showed on Wednesday.

Japan's imports from the US rose 8.1 per cent in the year to November, led by feed corn, medicines and oil products, helping to reduce its trade surplus with the US by 5.4 per cent on the year to 623.4 billion yen (S$7.6 billion). It was the fifth straight month of declines.

Japan's economy contracted the most in over four years in the third quarter due to a series of natural disasters that hurt factory activity and supply chains. Analysts expect a rebound in growth in the current quarter as temporary effects of natural disasters fade away, but trade frictions and slowing external demand cloud the outlook for the export-reliant economy.

A glance at the key numbers suggest that 2019 might turn out to be a challenging year.

Exports to China, Japan's biggest trading partner, rose 0.4 per cent in the year to November, slowing sharply from the previous month's 9 per cent annual gain.

The downturn in shipments to China is worrying given Beijing's yet unresolved trade dispute with the US, which threatens to rupture global supply chains and dent corporate profits in economies from Japan to Australia to Mexico and Europe.

The omens don't look good. Shipments to Asia, which account for more than half of Japan's overall exports, fell 1.9 per cent in November, down for the first time in nine months. Japan's overall imports rose 12.5 per cent in the year to November, bringing the trade balance to a deficit of 737.3 billion yen and marking a seventh month of shortfalls this year.

That looks to put Japan on track for the first full-year trade deficit since 2015 when it was reeling from a spike in fuel imports to make up for the loss of nuclear power in the wake of the 2011 Fukushima disaster.

Analysts at Capital Economics said in a note to clients that the recent slump in new export orders in factory surveys suggests that shipment volumes might continue to stagnate.

"The upshot is that net trade will probably remain a drag on GDP growth next year." REUTERS