Japan July export growth slows as global demand shows signs of weakening

Japan logged a goods trade deficit for the fourth month in a row in July but the value shrank 72.3 percent from a year earlier to 268.1 billion yen ($2.2 billion), the government said Wednesday, as imports were pushed down by declining crude oil prices. It followed a 9.5 per cent year-on-year rise in June.

Exports to China, another major destination for Japanese products, increased 4.2 percent to 1,179.7 billion yen for the fifth consecutive monthly gain, while imports from the country rose 13.5 percent to 1,652.6 billion yen.

Unless we see material rebound in exports in the near future, we will likely see Japan’s trade deficit widen, noted Credit Suisse this morning.

In July, Japan’s exports to China rose 4.2 percent from a year earlier, while shipments to the U.S. jumped 18.8 percent, helped by a 41 percent jump in exports of vehicles and parts.

The lacklustre figures come days after news Japan’s economy contracted last quarter, boosting speculation the central bank will be forced to unleash more stimulus as Tokyo’s “Abenomics” growth blitz stumbles.

Imports from the Middle East fell 40.5 percent as the value of imports of oil, gas and other fuels fell by about a third.

The economy is expected to resume growing in the current quarter if consumer spending bounces back, but weaker exports suggest that the overall pace of expansion may not be enough to generate the price growth needed to banish the risk of returning to deflation.

Measured in dollar terms, Japan’s exports to China peaked in 2011, fell sharply in 2012 thanks to a flare-up in territorial disputes and have been flat for the past two years. Investors were also anxious about the Chinese economy following a 6.15 per cent drop in the benchmark Shanghai Composite Index on Tuesday, its biggest fall in three weeks, they said.

“Exports to Asia look a little sluggish”, said Hidenobu Tokuda, senior economist at Mizuho Research Institute.