Japan's exports pick up amid rebound in key car shipments

TOKYO • Gains in Japan's exports widened for the first time since May as the country's key auto shipments recovered and global trade showed signs of regaining traction before the Omicron coronavirus variant began its spread.

Higher exports of steel and semiconductor equipment helped lift the overall value of Japanese shipments last month by 20.5 per cent from last year's level, the Finance Ministry reported yesterday in figures that were closely in line with estimates. The gains were more than double those of October.

Stronger Japanese exports are good news for the country's recovery prospects. They also add to signs that easing supply constraints were helping to put the global economy on a better footing in the weeks before the emergence of the Omicron variant introduced a new element of uncertainty.

Japan's import figures, though, showed more evidence of the rising cost pressures that are driving up inflation around the world and squeezing profits for Japanese businesses. Imports of crude oil, the price of which has surged, more than doubled from last year and played a big role in creating the biggest trade deficit since January last year.

"We saw a bit of relief in supply constraints in November, but there's a risk that the Omicron variant could halt factories abroad and increase supply constraints like the Delta variant did," said economist Koya Miyamae at SMBC Nikko Securities. "A weaker yen is making oil imports even more expensive, which will work against consumption at home."

Last month's export gains were broad-based, with shipments to the United States, China and the European Union all logging their strongest increases since summer. Japan's car exports, a key driver of the economy, increased about 4 per cent, recovering from a fall of more than a third in the previous month, even as supply chain snarls persisted.

With rising prices for petrol and other select items causing some concern that Japan's consumers might pull back, the pressure for exports to carry the recovery increases. Analysts see the economy bouncing back at the end of the year after shrinking last quarter for the fifth time in eight quarters.

Still, the spread of Omicron since late last month now clouds the outlook to some extent, as countries limit access to travellers and weigh whether to reinstate domestic restrictions. Supply bottlenecks also continue to affect manufacturers, with Toyota Motor cutting production again this month due to parts shortages.

"Overall, there's a recovery in exports led by cars," said economist Takeshi Minami at Norinchukin Research Institute. "But it's likely to remain quite slow. Toyota has already said its December plan of getting its production levels back is facing delays, and it's still unclear whether it'll get back on track in January given that South-east Asia is still facing Covid-19 problems."

BLOOMBERG