Japan's export growth slows; import costs weigh on recovery hopes

TOKYO (Reuters) -Japan’s export growth weakened to its slowest in seven months in September, while a surge in imports added to worries that pandemic-led global supply chain snags could derail a fragile economic recovery.

A laborer works in a container area at a port in Tokyo, Japan, March 16, 2016. REUTERS/Toru Hanai/Files

The data will be among factors the Bank of Japan will scrutinise when it releases fresh quarterly growth projections at its policy meeting later this month.

Exports rose 13.0% in September from a year earlier, the Ministry of Finance’s trade data showed on Wednesday, compared with a median market forecast for an 11.0% rise.

While ahead of forecasts, export growth weakened from 26.2% in the previous month and was the slowest since February.

Shipments to China, Japan’s largest trading partner, rose 10.3% in September year-on-year, led by semiconductors and plastic materials, while car exports fell 71.9%.

U.S.-bound exports, another key destination for Japanese goods, fell 3.3% to mark the first decline in seven months, as demand for cars and airplanes weakened.

Imports, meanwhile, jumped 38.6% in the year to September, following the prior month’s 44.7% gain, driven by increased costs of oil, coal and medicines.

Imports have now risen for eighth straight months, fuelling concerns that recent yen weakening and surging oil prices are adding to costs in resource deficient Japan.

“Rising import prices hurt the terms of trade for Japanese companies,” said Ryosuke Katagi, market economist at Mizuho Securities. “As consumer price inflation remains stagnant in Japan, companies cannot pass on the soaring costs to consumers, damaging corporate profit.”

Japan’s trade balance swung into a deficit for a second straight month at 622.8 billion yen ($5.43 billion).

The data may add to worry among policymakers hoping for an export-led recovery, while the rising import costs will stoke fears of stagflation, or a combination of rising inflation and stagnating growth.

Japan’s economy has just emerged from last year’s pandemic-induced doldrums thanks to robust global demand.

Policymakers are under pressure to keep intact the fragile recovery, which has faced additional strains from a resurgence of the pandemic in other parts of Asia.

The world’s third-largest economy is expected to have expanded a meagre 0.8% in the third quarter, a Reuters poll showed, as parts shortages and supply constraints caused by Asian factory shutdowns disrupted output of automakers.

($1 = 114.6200 yen)

Source: Read Full Article