Japan Exports Sharply Drop in December

Japan’s exports sharply declined in December to mark as its biggest year-on-year drop since October 2016 as falling shipments to China and regional markets hit the world’s third-largest economy.

Data presented on Wednesday by the Ministry of Finance (MOF) showed exports last month shrunk 3.8 percent from 2017, its lowest in more than two years and higher than the 1.9 percent slump expected by economists.

The report underlines increasing external weight on Japan’s economy. Heavier external pressures have raised the odds of Japan experiencing a recession this coming fiscal year beginning April, a British news agency’s poll of economists showed.

Weak exports will likely strain the country’s economy over the coming quarter, already feeling the pressure from a slowdown in China – a key market for its major manufacturers who ship equipment and supplies used by Chinese manufacturers of semiconductors, mobile phones, and other products.

Senior Japan Economist Marcel Thieliant said net trade should have remained a drag on gross domestic product (GDP) growth in the fourth quarter, adding that they think it will remain weak this year.

The country’s shipments to Asia, which make up more than half of overall exports, stumbled 6.9 percent in December.

US President Donald Trump has criticized Japan and China over trade, threatening to levy strict duties on imports of Japanese automobiles, which account for about two-thirds of the country’s $69 billion annual trade surplus with the US.

Trade data released on Wednesday showed exports to the US grew 1.6 percent in the previous month, driven by shipments of semiconductor production tool and car motors.  US-bound auto exports added 1.9 percent to 169,319 units.

Japan’s December imports from the US increased 1.9 percent from a year ago, bringing the trade balance to a deficit of $55.3 billion and recording an eight month of shortfalls in 2018.

That resulted in the country’s first full-year trade deficit since 2015 when it staggered from a rise in fuel imports to make up for the loss of nuclear power after the 2011 Fukushima disaster.

China Slowdown Spreads

Concerns over China’s output seemed on track to rise, with data published earlier this week showing the world’s no. 2 economy having a hard time recovering from the effects triggered by the trade war with the US, leaving 2018 expansion at a 28-year low.

The International Monetary has also cut its 2019 and 2020 global growth forecasts to 3.7 percent and 3.6 percent respectively, citing US-China trade tensions, climbing US rates, and a no deal Brexit as reasons for the downgrade.

Exports to China, Japan’s main trading partner, were down 7 percent in the year to December, according to official data.

With the trade war already taking its toll on supply chains worldwide, the fear is that a major disruption might send corporate profits lower in Japan and other countries, and lead key economies into sharp declines.

China’s slowdown has also spread to Taiwan and South Korea, as the two countries posted on Tuesday soft December exports orders and quarterly exports respectively.

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