Japan exports tumble most in 3 years as China downturn bites

Japan's trade balance swung back to a surplus of 140.2 billion yen (S$1.69 billion) in December, 2015.
Japan's trade balance swung back to a surplus of 140.2 billion yen (S$1.69 billion) in December, 2015.PHOTO: BLOOMBERG

TOKYO (REUTERS) - Japan's exports fell the most in more than three years in December from a year earlier, stoking fears of economic contraction in the final quarter of 2015 as a slowdown in China and emerging markets takes its toll on the export-reliant economy.

Ministry of Finance data on Monday (Jan 25) showed exports fell 8.0 per cent in the year to December, down for the third straight month, marking the biggest drop since September 2012.

An annual decline of 6.8 per cent was expected by economists in a Reuters poll.

Such weak data should keep the Bank of Japan under pressure to act as early as at its Jan 28-29 review, as the collapse in oil prices weighs on inflation expectations while worries over a China-led global slowdown and a stock market rout sap business morale.

The central bank is expected to cut its inflation projection for the fiscal year from April to possibly below 1 per cent this week - far below its 2 per cent target - with the outcome of the two-day policy review seen hanging in the balance.

"Given declines in imports, domestic demand is likely to have slumped and thus chances are high that the economy suffered a contraction in October-December," said Koya Miyamae, senior economist at SMBC Nikko Securities.

On a seasonally-adjusted basis, exports fell 3.8 per cent in December from the previous month, the data showed.

Exports to China, Japan's biggest trading partner, fell 8.6 per cent in December from a year earlier, down for a fifth straight month, dragged down by shipments of chemicals and electronics parts.

Shipments to Asia, which accounts for more than half of Japan's exports, declined 10.3 per cent in the year to December.

Exports to the United States, another key market for Japanese goods, fell 3.4 per cent year-on-year in December, led by shipments of mining machines and steel and metal processing machinery. EU-bound shipments grew 3.1 per cent.

Imports fell 18.0 per cent in the year to December, versus the median forecast for a 16.4 per cent annual decline, bringing the trade balance to a surplus of 140.2 billion yen (S$1.69 billion).

Japan's economy narrowly dodged a recession in July-September, and analysts have flagged the risk of a contraction due to weakness in private consumption and capital expenditure.

The International Monetary Fund cut its global growth forecasts for the third time in less than a year last week, as Beijing estimated China's 2015 growth at the slowest in 25 years.