Japan: Export Collapse Continues

Econintersect: Japanese exports continued to decline in August. Overall Japan’s exports declined 5.8% year-over-year. The numbers for China were even worse at -10%. Since China is Japan’s biggest trading partner much of the overall decline can be attributed to China.

This decline followed an export collapse of 8.1% year-over-year for July. With much of Japan’s business in China shut down for the past week as protests raged over Japan’s decision to buy some disputed islands, it can be anticipated that another big decline in exports overall and to China in particular will be reported for September.

The dispute over the islands is just the latest straw for the camel’s back. China’s imports from Japan have declined 10 of the past 11 months, according to the BBC.

Japan, which depends on a positive current account balance, appears ready to enter another recession this quarter as the trade balance seems destined to go substantially negative. Less than two weeks ago Japan’s second quarter (April – June) GDP estimate was cut in half to 0.7% growth (annualized). This latest blow to exports could make a positive print for GDP in the third quarter problematic, depending of course on the outcome for imports.

The Bank of Japan (BoJ) announced another monetary easing just two days ago, perhaps in anticipation of the latest news. (See GEI News.)

Japan still has significant export growth to the U.S., up 10.3% in August. But exports to the EU were even harder hit than to China. Exports to Europe declined by 22.9%.

In August imports fell less than did exports, declining by 5.4% year-to-date, 0.4% less than exports. For the second month in a row Japan suffered a negative trade balance. In August the deficit was 754.1 billion yen, which followed another big deficit for July (517 billion yen)

The Japanese balance of trade has been in a very unusual negative position since the second quarter of 2011, following the March 2011 mega quake and tsunami in March of that year. From 1979 to 2010 Japan had been consistently in a positive current account balance.