Another warning bell about the health of the major economies and global trade as Japan’s exports fell sharply in August for the 9th month in a row.
In fact, the fall was much larger than forecast and added more doubt to the strength of the economy as the Bank of Japan ends its monthly two-day meeting today (Thursday).
The August trade data from Japan adds strength to the warning from the World Bank boss, David Malpass that global economic growth is going to be slow for some time to come.
“The slowdown in global growth is broad-based,” Malpass said in a speech in Washington on Tuesday. He forecast that recent developments suggest global economic growth will likely to fall short of the lender’s June projection of 2.6% in real terms in 2019.
The nominal growth rate appears poised to slow to less than 3 percent – “a big letdown” from the about 6 percent pace in 2017 and 2018, he said.
Complicating matters is a continuing trade row with South Korea, a major export destination. Japan has removed South Korea’s “white list” status and yesterday South Korea replied in kind, meaning imports from Japan will take longer to process and move from ports to end-users.
Japan’s exports fell 8.2% from August 2018 last month as shipments of computer chip-making machines to China and other parts of Asia remained weak, according to figures data from the Ministry of Finance.
That compared with the 2.3% contraction forecast in a poll of economists and marked the ninth straight month of on-year falls.
The country logged a 136.3 billion yen ($US1.26 billion) trade deficit in August compared with a Y251 billion trade deficit in the previous month.
Japan’s exports to China fell 12.1% on year due to weakness in demand for semiconductor-making equipment and car parts.
Exports to the US declined 4.4% – the first drop in 11 months–as demand for cars and automobile parts sputtered.
The results will likely add pressure to the Bank of Japan to ease monetary policy further as uncertainty over the global economy grows and as other major central banks have recently turned more dovish.
“It’s worrying that exports to Asia and especially China are falling,” said Atsushi Takeda, chief economist at Itochu Economic Research Institute.
“There’s no doubt that the Chinese economy is slowing down as the impact of the third round of U.S. tariffs is starting to be felt,” according to Reuters.
August’s fall was much sharper also than the 1.6% slip reported for July when volumes rose for the first time in 8 months.
Exports in volume terms, which strips away the exchange rate impact, fell 6.0% year-on-year in August, more than reversing July’s increase, which was the first in nine months.
Relations between Japan and South Korea have worsened since a ruling by South Korea’s Supreme Court last year that Japanese companies should compensate South Koreans who were conscripted as forced labourers during World War Two.
Japan removed Seoul’s fast-export status in late August after imposing tighter controls on exports of three materials to South Korea used in chips and display industries. South Korea has also complained to the World Trade Organisation.
