Japanese Exports Decline for the First Time in Two Years, Raising Global Slowdown Concerns

Japanese Exports Decline: Japanese exports lost money for the first time in two years in July. The area dropped for the first time in two years. This drop in light oil and semiconductor equipment demand raises concerns about a global slowdown as huge countries like China suffer.

Japan’s Ministry of Finance announced a 0.3% drop in July exports on Thursday. This number is surprising because analysts predicted a 0.8% decline in a survey. June exports rose 1.5%.

Latest Cabinet Office data reveals June capital spending surged. Companies expect core orders to drop this quarter. This may be attributed to decreased international demand.

Exports drove Japan’s second-quarter growth. The newest numbers show slow growth. The stagnating Japanese economy caused the rise. Auto sales and international tourism have spurred growth recently. Japan, the third-largest economy in the world, wants more exports to boost private consumption, which has decreased due to rising prices. Second-largest manufacturing exporter and third-largest auto exporter is Japan.

Worryingly, global downturn risks and China’s weak development path are linked. The World Bank’s 2024 warning that tighter lending rules and higher interest rates could slow global development confirms this. Data from the World Bank supports this position. Singapore’s trade surplus exceeds its economy. This makes the country’s export decline a significant worldwide demand indicator. Singapore’s declining exports match this global trend.

Japanese Exports Decline

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Takeshi Minami of Norinchukin Research Institute was pessimistic. With China’s slowdown, “Demand in Europe and the U.S. is not likely to grow, and Japan’s economy could go into a recession this quarter.” 

China, Japan’s biggest trading partner, saw 13.4% lower July exports. Fewer automobiles, stainless steel, and integrated circuits shipped caused this decline. In July, exports to the US, a crucial trading partner, rose 13.5%. The highest monthly total. Exports of electric cars and parts drove this growth.

The world economy is unpredictable, but Takeshi Minami believes the Bank of Japan will retain current monetary policy. While letting long-term interest rates vary with inflation and GDP, the central bank did not update its yield curve management targets in July. It allowed long-term interest rate changes, but yes. Yield curve control targets remained unaltered.

Thursday’s import data are 13.5% lower than July last year. Unexpectedly, Japan’s trade balance fell by 78.7 billion yen.

Recent core machinery orders rose 2.7% from the previous month. Compared to last year, it fell 5.8%. The Japanese economy was further strained by third-quarter projections and export sector underperformance.

Marcel Thieliant of Capital Economics analyzed current trade figures. Some net exports rose in the third quarter. He warned, “Even if this trend keeps going, GDP growth is about to slow down by a lot.”

Our Reader’s Queries

Why is Japanese economy in decline?

Japan’s economy suffered a 2.1% annual contraction in July-September due to weakened consumption and investment, according to the government. The Cabinet Office also noted that the world’s third-largest economy was hindered by sluggish wage growth.

What are the problems with exporting to Japan?

Companies may face various barriers when it comes to importing goods into Japan. These may include specific standards and testing requirements, import license requirements, restricted or prohibited imports, temporary entry of goods, certifications, and labeling requirements. It’s important for businesses to be aware of these potential obstacles and to take the necessary steps to comply with Japanese regulations in order to successfully import their products.

Is Japan in recession 2023?

The employment situation may be a contributing factor to the decline. According to the Japan Center for Economic Research (JCER), the Recession Indicator for Japan in September 2023 rose by 3.3 points from the previous month, reaching 56.5% (Figure 1, retroactively revised basis). This suggests a potential downturn in the economy.

Is Japan in a trade deficit?

In November 2023, Japan’s trade deficit amounted to 776.94 JPY Billion. Over the years, the country’s balance of trade has averaged 285.88 JPY Billion, with a peak of 1608.68 JPY Billion in September 2007 and a low of -3506.43 JPY Billion in January 2023.

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