Japan exports drop for first time since 2021

• Exports in July fell 0.3 percent, in comparison to the forecast of a 0.8 percent drop
• China’s slowdown raises fears of the possibility of a sharp global slowdown
• Trade balance shifts from red to green once more
• Key capex gauges rising 2.7 percent m/m in June, forecast weak

TOKYO, The exports of Japan decreased in July for the first time in more than two years, brought down by sluggish demand for chip-making and light oil equipment, highlighting concerns over the possibility of a global recession as demands for key markets such as China declines.

Japanese exports declined by 0.3 percent in July year-on-year, Ministry of Finance (MOF) data revealed on Thursday. That was compared to an 0.8 percent decline predicted by economists in a Reuters poll. It was followed by a 1.5 percent increase in the month prior.

Separate figures released by the Cabinet Office showed a key measure of capital expenditure grew in June. However, the industry is bracing for a drop in core orders in the upcoming quarter, partly due to low demand for offshore products.

Overall, the plethora of figures highlighted the fragility of Japan’s export engine that contributed to boosting better-than-expected second-quarter GDP (GDP) growth in the second quarter, with car sales and tourism the two biggest factors.

Japanese policymakers are betting on exports to boost this world’s no. Three economies help fill the gap in consumption, which the rising cost of living has hampered.

However, the prospect of a faster global slowdown and declining growth in Japan’s main marketplace China have raised doubts regarding the future.

The World Bank has warned that rising interest rates and tighter credit will take a greater burden on global growth in 2024.

Data showing a persistent decline in Singapore’s exports highlighted the concern about the global economy. These figures are interpreted as an indicator of foreign demand, as trade flows outnumber the city’s economic growth.

“China is weak, and I don’t anticipate the demand coming from Europe or America to increase more,” stated Takeshi Minami, the chief economist at Norinchukin Research Institute, adding that Japan’s economy might dip in its growth during this quarter.

Exports by destination to China, the largest trading partner, dropped 13.4 percent year-on-year in July due to lower shipments of stainless steel, cars, and microchips. This follows the 10.9 percent decrease in June.

U.S.-bound exports increased 13.5 percent year-over-year in December to be the highest value. The shipments of electric vehicles and auto parts led them. This followed an 11.7 percent increase in the preceding month.