Japan export growth slowed to 0.1% in November

Declines in machinery exports offset growth in transport equipment and manufactured goods.

Japan’s exports inched up a mere 0.1% YoY in November which is significantly lower from the 8.2% increase seen in October, according to UOB Global Economics and Markets Research.

“Export growth turned markedly weaker to traditional export destinations such as US (1.6% YoY), China (0.4% YoY) and ASEAN (1.4% YoY), whilst overall exports to Asia contracted -1.9% YoY due to significant declines recorded in almost all North Asia markets like South Korea (-9.3% YoY),” UOB senior economist Alvin Liew said in the report.

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He added how exports into the European Union (EU) in November remained positive but slowed down to 3.4% YoY from 7% in October as there were several pockets of weakness such as UK and Switzerland which contracted -10.1% and -58.2% YoY, respectively.

By product types, export growth in transport equipment (2.5%), chemicals (8.2%) and manufactured goods (3%) were marginally offset by declines seen in machinery (-2.3%), electrical machinery (-2.7%) and others (-5.8%), the report highlighted.

Whilst imports slowed from October’s 19.9% growth, it clocked in at 12.5% YoY which is higher that Bloomberg’s forecast of 11.8%. Energy such as mineral fuels remained the main driver of imports, rising 38.9% YoY in November and contributing 7.8 percentage points (ppt) to headline import growth.

“It is notable that the import of petroleum rose in volume terms by 14.1% YoY even though crude oil prices plunged in the October-November period,” Liew said. “The increase me be reflecting higher year-end energy demand.”

Overall, the lacklustre exports growth and slowing pace of imports increase resulted in a bigger than expected trade deficit for Japan of US$6.56b (JPY737.3b) in November. On a seasonally adjusted (SA) basis, the trade deficit was US$4.38b (JPY492.2b) from a deficit of US$2.69b (JPY302.7b) in October, the report highlighted.

Also read: Japan's trade deficit reached US$5.23b in May

“Beyond the November export disappointment, we are turning increasingly cautious about Japan’s trade outlook,” Liew commented. “Moderating global demand in the next few quarters could be met with increasing US-led trade uncertainties which is the key downside risk to Japan’s trade.”

Liew also added that Japan firms and car markers will face added negative effects seeing as they suppliers of parts and components to China.

“Even as Trump has put measures on hold for Japan, he could still pull the trigger in 2019 to impose tariffs of 25% on automobile imports from Europe and Japan,” Liew said. Motor vehicles exports account for 15% of Japan’s exports and the US market is a key export destination for Japanese cars.