Japanese exports drop again in the face of weak external demand and put the BoJ on notice

TOKYO (Reuters) – Japanese exports fell for the third month of February, signaling growing pressure on a trade-dependent economy, suggesting that the central bank might be forced to offer more incentives to mitigate the effects. slowing external demand and trade frictions. .

The slowdown in global growth, the Sino-US trade war and the complications of Britain's exit from the European Union have already forced many policymakers to adopt a more flexible stance in recent months.

Japan is in a situation similar to that of the rest of the world, where factories have braked sharply and business confidence has collapsed in the face of rising global economic uncertainty.

Data from the Ministry of Finance showed Monday that exports fell 1.2% in February, a decline of more than 0.9% expected by economists in a Reuters poll.

It followed a sharp decline of 8.4% from one year to the next in January, marking a third consecutive month of decline due to lower auto deliveries, higher sales and more. 39, steel and semiconductor production equipment.

"Exports to advanced countries such as the United States and Europe were still supported, but shipments to China and Asia were clearly stagnant," said Takeshi Minami, an economist in the United States. head at the Norinchukin Research Institute.

"Exports will remain on a downward trend for now, which could reduce capital spending and wages. The national economy will face a difficult situation in anticipation of the rise in the October sales tax. "

Trade data add to a recent set of weak indicators, such as factory output and a key indicator of investment spending, which raised fears that Japan's record post-war growth do not end.

Some analysts say that a recession can not be ruled out.

The Bank of Japan reduced its opinion on exports and production last week, while keeping the policy unchanged. However, continued weakness in exports could prompt the country to slow further, especially as inflation remains far from its target of 2% and pressure on businesses and consumers continues to plummet. increase.

At last week's post-political press conference, BOJ Governor Haruhiko Kuroda acknowledged the challenges the economy was facing, but gave no indication as to the possibility of An additional raise.

But Kuroda may have to change tactics in the face of a series of weak economic indicators.

Many BOJ members expect the Japanese economy to come out of the difficult period in the second half of this year, provided that China's stimulus packages can boost demand in the country.

The greatest concern of BOJ policymakers is that the weakening of exports and production will undermine business confidence, prompting them to delay capital spending and wage increases.

BOUNCE FRAGILE

The trade war between the United States and China – Japan's largest export markets – has already limited world trade.

Monday's trade statistics showed that exports to China, Japan's largest trading partner, grew by 5.5% year-on-year on shipments of semiconductor and car production equipment after falling 17.4% in January.

However, trade with the Asian giant remained weak, even after the average effect of the Lunar New Year holidays, shipments to China decreased by 6.3% in January-February compared with the previous year. last year.

The seasonally adjusted total value of trade rose 6.7% in February, the largest gain in two years. The volume of exports fell 0.6% in February compared to February, following the 9.0% drop the previous month.

"The changes in the Chinese New Year calendar partly explain the sharp fluctuations in trade volumes at the beginning of the year, so the recent strength of export volumes may soon be dissipated", said Marcel Thieliant, Senior Economist in Japan at Capital Economics.

"We still believe that net trade will continue to weigh on GDP growth, both in the first quarter and throughout 2019."

Japanese shipments to Asia, which account for more than half of total exports, declined 1.8%, the fourth consecutive month.

US exports increased 2.0%, but imports from the United States grew 4.9%. Japan's trade surplus with the country fell 0.9 percent year on year to 624.9 billion yen ($ 5.60 billion) in February.

However, Japan's still large surplus with the United States raises concerns among Japanese auto makers and exporters that Washington could impose heavy taxes on its imports.

Japanese car imports account for about two-thirds of Japan's annual trade surplus of $ 69 billion with the United States, making Tokyo and Beijing the subject of Trump's criticism.

In February, Japanese auto exports to the United States rose only 0.5% year-on-year to 152,198 units in February, as shipments dropped by 6.8%.