Less-than-expected fall in Japan's exports offers hope

TOKYO • Japan's exports fell less than expected in June in a tentative sign that overseas demand could be recovering from persistent weakness that set in last year.

Slowing decline in exports could ease concerns for Japan's policymakers as they try to revive growth via stimulus spending on infrastructure after their structural reform plans failed to deliver hoped-for results.

"Exports are showing signs that they have stopped deteriorating," said senior economist Norio Miyagawa at Mizuho Securities. "The US economy is a bright spot and should help Japan's exports recover. (Tokyo's) stimulus plan is designed to help domestic demand, but without broader reforms they are just buying time."

In its monthly economic report released yesterday, the government said business sentiment has worsened, suggesting an awaited rebound in domestic demand is not guaranteed as companies may delay investment due to worries about overseas economies.

The 7.4 per cent annual decline in exports in June was less than the median estimate for a 11.6 per cent annual decline by economists, although it was the ninth consecutive monthly fall.

In volume terms, exports rose 2.9 per cent in June from the same period a year earlier, the first increase in four months.

The trade balance hit a surplus of 692.8 billion yen (S$8.9 billion) versus a 494.8 billion yen surplus seen in the poll. Exports fell in June on declines in shipments of cars and steel, the data showed.

On a positive note, Japan's exports of food, medicines and finished metal products rose in June from a year ago.

Exports to China - Japan's largest trading partner - were down an annual 10 per cent last month due to falling shipments of chemicals and metal processing equipment. That was less than a 14.9 per cent annual decline in the previous month as an increase in shipments of cars to China helped offset a fall in other exports.

US-bound shipments fell 6.5 per cent year on year, considerably less than the 10.7 per cent annual decline of the previous month due to a pick-up in food exports.

Japan's imports were down 18.8 per cent year on year.

The yen has risen around 13 per cent versus the US dollar so far this year, and some Japanese policymakers are worried about further gains that would severely erode exporters' earnings and increase deflationary pressure by lowering import prices.

Bank of Japan head Haruhiko Kuroda faces the most intense expectations for more monetary stimulus since his debut meeting as governor in 2013, when the authorities meet on Friday. "I expect the BOJ will step up qualitative and quantitative easing to show unity with the government," said chief economist Takeshi Minami at Norinchukin Research Institute. "No action would create disappointment and demand from the market for more easing in September."


A version of this article appeared in the print edition of The Straits Times on July 26, 2016, with the headline 'Less-than-expected fall in Japan's exports offers hope'. Print Edition | Subscribe