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2.7% dip in Japan's May exports raises fresh concerns
A FALL in Japan's May exports reported yesterday - the first such decline in 15 months - brought fresh concerns about the health of the world's third largest economy in the wake of the blow which the rise in the nation's consumption tax with effect from April 1 is expected to deal to domestic demand.
After the 2.7 per cent drop in last month's exports compared with May 2013 was announced, Japan's chief cabinet secretary Yoshihide Suga expressed confidence that overseas sales would recover in coming months, on the back of a recovery in the global economy.
But a number of other Asian exporting countries, including Singapore and South Korea, have also reported falls in their May exports to key markets including the United States, triggering concerns about the vigour of global demand.
Japan's exports to some Asian markets also fell in May - again for the first time in 15 months - along with the decline to the US market.
Exports to China, Japan's biggest two-way trading partner, rose by 0.4 per cent in May to 1.05 trillion yen (S$12.8 billion), however, while imports from China were down 2.7 per cent to 1.4 trillion yen. Exports to the European Union, meanwhile, grew by 14.5 per cent to 606 billion yen while imports increased 5.7 per cent to 652.8 billion yen.
The drop in Japan's overall exports last month coincided with a 3.6 per cent fall in imports, in the wake of the consumption tax hike. This allowed the nation's trade balance to show a second consecutive monthly decline but trade deficits are expected to continue in coming months, analysts said.
Japan's trade deficit came out at 909 billion yen last month, marking just under two years of consecutive monthly deficits but was 8.3 per cent lower than the level a year earlier, Japan's Ministry of Finance reported.
The value of imports fell 3.6 per cent to 6.5 trillion yen, down for the first time in 19 months, with those of crude oil falling by 15 per cent and of coal plunging 24.4 per cent, suggesting production activities have been petering out after the consumption tax hike.
Exports, meanwhile, decreased by 2.7 per cent in value to 5.6 trillion yen, as overseas sales of marine vessels and motor vehicles dropped by 33 per cent and 4.3 per cent, respectively. Car shipments fell for the first time in 14 months, the finance ministry added.
The drop in exports was sharper than economists had forecast and followed a 5 per cent rise in Japan's April exports. This highlights the delay in advanced economy recovery filtering through to exporting firms, analysts explained.
This was underscored in Singapore's exports for May, which unexpectedly fell on weak shipments to its key markets, Reuters reported yesterday.
Singapore's non-oil domestic exports to the United States fell 8.8 per cent in May from a year earlier, compared with 11.7 per cent growth in April, Reuters said.
In South Korea, exports to the US rose 5.5 per cent on-year, but that was much slower than April's 19.3 per cent jump.
The finance ministry data showed that Japan's US-bound exports fell 2.8 per cent in May, the first drop in 17 months led by decline in car shipments.
Exports to Asia, which account for more than half of Japan's total exports, fell 3.4 per cent in May from their level a year earlier.