TOKYO: Japan’s exports fell for the first time in 10 months in September, data showed on Thursday (Oct 17), a worry for policymakers as any prolonged weakness in global demand may complicate the central bank’s path to exit years of ultra-easy monetary policy.
Soft demand in China and slowing US growth weighed on exports, while the yen’s recent rebound, in part due to the Bank of Japan’s unexpected rate hike in late July, helped further push down their value.
“It’s possible that exports will continue to struggle in coming months in light of uncertainties particularly in the Chinese economy,” Kazuma Kishikawa, economist at Daiwa Institute of Research, said.
China’s domestic demand appears to be weaker than expected with the country’s stimulus packages slow to make an impact, he added.
Total exports in September dropped 1.7 per cent from a year earlier, Ministry of Finance data showed, missing a median market forecast for a 0.5 per cent increase and following a revised 5.5 per cent rise in August.
Exports to China, Japan’s biggest trading partner, slumped 7.3 per cent in September from a year earlier, while those to the United States were down 2.4 per cent, the data showed. Weak demand for automakers led the export declines for both countries.
“The latest data serves as a reminder for the BOJ that a sharp rise in the yen can drag exports,” Kishikawa said, although he pointed out that relatively small declines like the one in September are unlikely to affect the BOJ’s future rate decisions.
Imports in September grew 2.1 per cent from a year earlier, compared with market forecasts for a 3.2 per cent increase.
As a result, Japan ran a trade deficit of ¥294.3 billion (US$1.97 billion) for September, compared with the forecast of a deficit of ¥237.6 billion.
BOJ Governor Kazuo Ueda has highlighted external risks such as US economic uncertainties in his recent dovish commentary, emphasising that policymakers can afford to spend time scrutinising such risks in timing the next interest rate hike.
While the BOJ is expected to keep interest rates steady at its Oct 30-31 meeting, it will roughly maintain its forecast for inflation to stay around its 2 per cent target through March 2027, according to sources familiar with its thinking.
Nevertheless, a quarterly central bank survey suggested headwinds from the slowing global economy have yet to be fully felt by manufacturers, with the business mood holding up and companies retaining robust spending plans.
