Japan’s Export Falls Ease as Trade Gradually Improves

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Japan’s exports fell in August at the slowest pace in five months as trade continued to slowly improve with the virus receding in some key markets and demand picking up.

The value of Japan’s overseas shipments declined 14.8% from a year earlier, easing from a 19.2% drop in July, the finance ministry reported Wednesday, offering another sign that the low point for virus-hit trade has passed. Economists had projected a 16.1% slide.

Exports of cars and other motor vehicles continued to be the biggest drag, slipping by 19.4%, but much improved from July’s fall of about 30%. Exports have now fallen for 21 straight months.

Key Insights

  • “Today’s data confirm that Japan’s economy has already bottomed, but the economy is a long way off getting back to a pre-virus level,“ said Kazuma Maeda, an economist at Barclays Plc, flagging the comeback in auto shipments after massive inventory and output adjustments around May.
  • The return of activity in China, the first country hit by the virus and the first to bounce back, has helped shipment declines from being worse. Shipments to China rose for a second straight month, though the gain was smaller than in July. The pace isn’t likely to accelerate quickly given sluggish global demand, Maeda added.
  • Yoshihide Suga, who is set to take over as prime minister later Wednesday, faces the challenge of trying to revive the economy after it shrank by a record last quarter. His success will depend a lot on exports, a key driver of Japanese growth.
  • Japan’s virus numbers have been falling lately, allowing Tokyo to further relax restrictions and prompting the central government to consider adding the capital to the national tourism campaign. Still, the economy’s reliance on global trade makes it vulnerable, especially with the virus resurgent in Europe and the possibility of new waves emerging in the fall.

What Bloomberg’s Economist Says

“A rapid recovery in Japan’s exports to China and the U.S. is a positive signal for 3Q GDP. The pickup — driven by stronger shipments of automobiles — helped to narrow the year-on-year drop in overall exports. To be sure, some weakness persists — shipments to Europe and Asia ex-China remained sluggish, though they did claw back some ground.”

–Yuki Masujima, economist

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  • Overall shipments to the U.S. fell 21.3% from a year earlier, while those to the EU declined 19.2%. Exports to China rose 5.1%, after increasing 8.2% in July.
  • Imports dropped 20.8%. Analysts had forecast a 17.8% decline.
  • The trade balance was a 248.3 billion yen ($2.4 billion) surplus. The projection was for a 15 billion yen deficit.

— With assistance by Toru Fujioka

(Adds more details from report.)