Japan April exports suffer biggest drop in three months, bode ill for growth
TOKYO – Japan’s exports fell in April at the fastest pace in three months as a stronger yen and weakness in China and other emerging markets take their toll on the country’s shipments, boding ill for growth prospects for the current quarter.
Exports declined 10.1 percent year-on-year in April, Ministry of Finance data showed on Monday, in line with a 10.0 percent annual drop expected by economists in a Reuters poll but worse than a 6.8 percent drop in March.
It was the seventh straight month of declines and the biggest since 12.9 percent in January, when Japanese shipments to Asia slowed sharply ahead of the Lunar New Year holidays.
The decline was likely exaggerated by a drop in US-bound car exports due to supply-chain disruptions caused by last month’s earthquakes in southern Japan, but a rising yen and weak global demand are clouding the outlook for the year.
“Drops in US-bound car exports were noise,” said Takeshi Minami, chief economist at Norinchukin Research Institute.
“Asia and the global economy remain weak. On top of that, yen gains squeeze profits at exporters, causing wages and capital spending to weaken, which would hamper ‘Abenomics’ aim of creating virtuous growth,” Minami said.
Imports fell 23.3 percent in April, worse than a 19.0 percent annual decline expected by economists and pointing not only to weak commodity prices but sluggish domestic demand.
A private business survey on Monday suggested more pain ahead for Japanese manufacturers. The Markit/Nikkei preliminary survey for May showed total new orders declined at the sharpest pace in 41 months.
The data adds to pressure on Prime Minister Shinzo Abe to do more to rev up flagging growth amid persistently weak demand at home and overseas. Abe is hoping win consensus on fiscal stimulus at a summit of leaders of G7 advanced economies in Japan later this week.
Exports to China – Japan’s largest trading partner – fell 7.6 percent in April, while the US-bound shipments fell 11.8 percent year-on-year. Car exports to the United States fell 4.4 percent, down for the first time since November 2014.
Exports to Asia, which accounts for more than half of Japan’s shipments, fell 11.1 percent in the year to April, but EU-bound shipments rose 9.9 percent.
Toyota Motor Corp (7203.T) recently forecast a bigger-than-expected 35 percent tumble in net profit for the current year due to the sharp appreciation of the yen, ending three straight years of record profits driven in part by a weak currency. But it still expected global sales to inch up this year.
The yen was trading around 110 to the dollar JPY= on Monday, pulling back from an 18-month high above 105 yen hit this month. -Reuters