Japan’s exports slow down sharply, machinery orders shrink | Wilnesh News

Japan’s export growth slowed sharply in August, with exports to the United States falling for the first time in three years, while machinery orders unexpectedly shrank in July, a worrying sign for an economy struggling to achieve a solid recovery.

Analysts said weak external demand undermined Japan’s efforts to promote sustainable economic growth, especially given the growing risks of a slowdown in the U.S. economy and further weakness in China, its two major trading partners.

Takeshi Minami, chief economist at Norinchukin Research Institute, said, “With the global economy failing to recover, economic growth in both the United States and China will slow down next year, and Japan’s exports will inevitably be in trouble.”

He said that with the sharp rebound of the yen in August, the boosting effect of the weak yen on exports has weakened.

Data on Wednesday showed that total exports rose 5.6% year-on-year in August, the ninth consecutive month of growth, well below the median market forecast of 10% growth, after rising 10.3% in July.

Exports to the United States fell 0.7%, the first monthly decline in nearly three years, and car sales fell 14.2%.

Exports to China, Japan’s largest trading partner, increased by 5.2% year-on-year in August.

Overall shipments are not optimistic either. Last month’s shipments fell 2.7% compared with the same period last year, marking the seventh consecutive month of decline.

Imports increased by 2.3% year-on-year in August, while economists expected a 13.4% increase.

As a result, the trade balance was a deficit of 695.3 billion yen ($4.9 billion), compared with the forecast of 1.38 trillion yen.

Separate data from Japan’s Cabinet Office showed that core machinery orders unexpectedly fell 0.1% month-on-month in July, confounding economists’ expectations in a Reuters poll for a 0.5% rise.

Core orders, a highly volatile data series seen as an indicator of capital spending over the next six to nine months, rose 8.7% compared with the same period last year, beating economists’ expectations for a 4.2% rise.

The government is sticking to its assessment of machinery orders that the recovery is stalled.

Growth in personal consumption helped Japan’s economy rebound strongly in the second quarter from a slump at the beginning of the year, but growth was revised down slightly last week.

A monthly Reuters poll last week showed business confidence among Japan’s largest manufacturers fell to a seven-month low in September, with managers across several industries expressing concern about weak demand from China, a sign of economic fragility.

The Bank of Japan is expected to keep monetary policy steady at a two-day meeting that ends on Friday, but signaled further interest rate hikes are imminent and highlighted the economy’s progress in keeping inflation near its 2% target.

Norinchukin’s Minami said economists generally expect consumption to support Japan’s economic growth, but “with little hope of an export boost, the recovery will be weak.”