Strong yen weighs on Japan's export growth

An international cargo terminal in Tokyo. Data out yesterday showed Japan's shipments last month grew 2.1 per cent from the same period a year ago, below the 4.7 per cent annual increase expected by economists in a Reuters poll. In February, exports
An international cargo terminal in Tokyo. Data out yesterday showed Japan's shipments last month grew 2.1 per cent from the same period a year ago, below the 4.7 per cent annual increase expected by economists in a Reuters poll. In February, exports grew 1.8 per cent.PHOTO: EPA-EFE

TOKYO • Japan's exports rose less than expected last month due to the strong yen, raising some concern about the outlook for shipments on top of anxiety over Washington's criticism of the nation's large trade surplus with the US.

Yesterday's trade data came during a two-day summit between United States President Donald Trump and Japanese Prime Minister Shinzo Abe.

While the trade surplus with the US narrowed slightly by 0.2 per cent year-on-year to 623.1 billion yen (S$7.6 billion) last month, it was still sizeable enough to draw criticism from Mr Trump.

The backdrop of rising trade tensions, stoked by the bitter US-China tariff stand-off, has roiled financial markets as investors worried about the impact on global growth.

Growth in export-reliant Japan could be undermined in the event of a hit to world trade, or if the US seeks measures to lower its trade deficit with the world's third-biggest economy.

"Exports can continue to grow because there is overseas demand for capital goods," said senior economist Yusuke Ichikawa at Mizuho Research Institute.

"We need to watch for risks posed by trade policy, because there is a sense Japan will have to make some concessions to the United States."

The yen was 6.3 per cent higher versus the US dollar last month compared with the same period a year ago, according to Finance Ministry data. This weighed on the value of Japan's exports.

Last month, the data showed shipments grew 2.1 per cent from the same period a year ago, below the 4.7 per cent annual increase expected by economists in a Reuters poll. In February, exports grew 1.8 per cent.

The yen was 6.3 per cent higher versus the US dollar last month, compared with the same period a year ago, according to Finance Ministry data. This weighed on the value of Japan's exports.

In volume terms, Japan's exports rose 1.8 per cent year-on-year last month, reversing a 2.1 per cent annual decline in February, a reason to not become overly pessimistic, Mr Ichikawa said.

Exports last month were supported by an increase in shipments of cars and semiconductor manufacturing equipment, the data showed.

Japan's exports to the US rose 0.2 per cent year-on-year, much slower than a 4.3 per cent annual increase in February.

Its exports to the European Union slowed sharply to a 0.3 per cent annual increase last month from an 11.5 per cent increase in February, which could raise some concern about demand from Europe.

In one positive sign, Japan's exports to China jumped 10.8 per cent last month from a year ago, rebounding from a 9.7 per cent decline in February as factories resumed operations after the Chinese New Year holidays.

REUTERS

A version of this article appeared in the print edition of The Straits Times on April 19, 2018, with the headline 'Strong yen weighs on Japan's export growth'. Print Edition | Subscribe