Japan's Exports and Machinery Orders Decline, Harming Economic Recovery
Japan: Japan's export growth decelerated significantly in August, rising 5.6% year-on-year, well below a median market forecast for a 10% increase and following a 10.3% rise in July. Shipments to the U.S. decreased by 0.7%, marking the first decline in nearly three years, driven by a 14.2% drop in auto sales. Exports to China, Japan's largest trading partner, rose 5.2%, but overall shipment volumes fell 2.7% from the previous year, marking the seventh consecutive month of decline. Import values grew 2.3% in August, below the expected 13.4%, resulting in a trade deficit of 695.3-billion-yen (USD 4.90 billion), which was better than the projected 1.38 trillion yen (USD 9.73 billion) deficit.
"Japan's exports are bound to struggle as the global economy is failing to pick up momentum, with growth in both the U.S. and China economies seen slowing down next year," said Takeshi Minami, chief economist at Norinchukin Research Institute. He noted that the boost from the weak yen to exports has diminished as the Japanese currency rebounded sharply in August.
Additionally, core machinery orders unexpectedly dropped 0.1% month-on-month in July, contrary to the 0.5% increase forecasted, though they rose 8.7% year-on-year, surpassing the 4.2% estimate. This data suggests a standstill in machinery order recovery. While personal consumption spurred a strong economic rebound in Q2, growth was slightly revised down last week. The Bank of Japan is expected to keep monetary policy unchanged but may indicate forthcoming interest rate hikes and emphasise progress in maintaining inflation around the 2% target. The weak external demand, amid potential slowdowns in the U.S. and further weakness in China, poses risks to Japan's sustainable economic growth.
Source : Reuters