Japan’s export growth beats consensus, keeping BOJ options open
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Exports rose 11.9 per cent in January from a year earlier, beating economists’ forecast of a 9.5 per cent gain, the Finance Ministry reported on Feb 21.
PHOTO: EPA-EFE
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Japan’s exports grew more than expected in January, providing much-needed support for the economy and keeping the door open for the Bank of Japan (BOJ) as it inches towards ending its negative rate policy.
Exports rose 11.9 per cent in January from a year earlier, beating economists’ forecast of a 9.5 per cent gain, the Finance Ministry reported on Feb 21. Imports declined for a 10th month, falling 9.6 per cent, spurred by slides in coal and liquefied natural gas. That compared with the consensus for an 8.7 per cent decline.
The timing of the Chinese New Year holidays skewed year-on-year comparisons by boosting exports to China. The trade balance flipped to a deficit of 1.76 trillion yen (S$15.8 billion) from a revised surplus of 68.9 billion yen in December.
The gain in exports, coming a month after a revised 9.7 per cent rise in December, is a positive sign for Japan after the economy unexpectedly fell into a recession in the last quarter of 2023 due to stagnant domestic spending.
The evidence that external demand is relatively steady will likely underpin market views that the BOJ can continue to move towards normalising monetary policy, as many economists expect to happen by April. The central bank’s policy board has recently sought to assure markets that the first rate hike since 2007 will not result in radical changes, as policy settings will remain accommodative.
S&P Global Market Intelligence principal economist Harumi Taguchi said: “Demand for electronic products and chip-making gears is recovering, and a drop in imports means inflation is stabilising and helping consumer sentiment.
“I think the BOJ can maintain a stance of looking to raise interest rates in April if it can confirm strength in wages.”
BOJ governor Kazuo Ueda reiterated his view earlier in February that the bank will keep parsing data carefully to judge whether a gradual economic recovery will continue.
The figures on Feb 21 were generally solid versus a year earlier.
Exports to the United States rose 15.6 per cent, driven by cars and medical devices in the 28th straight month of increases.
Those to the European Union gained 13.8 per cent, and exports to China rose by 29.2 per cent, as the number of working days in 2024 increased compared with a year earlier due to the timing of the Chinese New Year.
Shipments of cars and car parts along with equipment for chip-making were the main engines of growth in January.
Still, the gains “are likely to be only temporary”, according to Daiwa Securities economist Kota Suzuki. “Usually in January, a last-minute surge in demand before the Chinese New Year vacation boosts exports.”
The data on Feb 21 also showed that seasonally adjusted exports fell 3.6 per cent compared with December, an indication that the underlying trend may be more fragile than the headline figure suggests.
Looking ahead, external demand may waver as some of Japan’s key trading partners are expected to see growth decelerate in 2024.
In its latest quarterly outlook published in January, the BOJ said the economy “is expected to be under downward pressure stemming from a slowdown in the pace of recovery in overseas economies”.
Growth in the US is forecast to slow to 1.6 per cent in 2024.
Norinchukin Research chief economist Takeshi Minami said: “If you look at the world economy as a whole, it’s slowing down, so it’s not like exports will be that much of a driver of economic growth.” BLOOMBERG
