Japan's export growth unexpectedly quickened in January, as rising demand for cars and steel from China and Russia made up for falling U.S. sales. Exports, the engine that drove almost half of the economy's expansion last quarter, rose 7.7 percent, from December's 6.9 percent gain, the Finance Ministry said today in Tokyo.
And all of this is, let it be said, absolutely true. The annual rate of growth in exports in January did accelerate when compared with December (slightly), but the rate of annual increase is way down from the double digit growth figures (see chart below) achieved in the May to August period, and this seems to be the significant detail. Also since November last imports have been increasing at a faster annual rate than exports, which means that the trade balance is not increasing as rapidly as it was (indeed there was a deficit of 3.5 billion yen in January, although January is an unusual month, since ports are closed for the New Year holiday, so I wouldn't make a great deal of this at this stage), and since it is the trade balance that matters for headline GDP growth, it would seem that the net contribution from external trade is SLOWING at this point, and not as the Bloomberg slant on the story would have it, holding up well.
All the data Bloomber present, apart from this rather unhelpful slant is, of course, very much to the point. Shipments to Asia and Europe were at a record level for the month of January - up by 4.6% y-o-y to China (which the astute reader will note is below the average rate of increase in exports, so this is not a China story by any means at this point, and indeed Japan's trade deficit with China deteriorated by 5.8% y-o-y). Exports to Europe, OTOH, were up by 10% (and with Russia and Central and Estern Europe by about 40%) on a January to January basis, while shipments to the US were down 3.2%. Latin America is also starting to figure - although from a very low base, with Chile up 61% and Brazil 33%. Vietnam was up 67%, and India 44%. Indonesia was up by 26%, but Philippines is definitely not a Japanese export story, with January shipments being down nearly 10% y-o-y.
Shipments to the U.S. accounted for only about 20 percent of total exports in 2007, compared with about 30 percent in 2000. Over the same time period, China's share jumped from 7 percent to 15 percent. Sales to Russia have doubled in the last two years.
Really this sort of country-level data breakdown is going to be very interesting to follow going forward now, since it will give us some concrete reference points in that great "de-coupling re-coupling" debate. As Bloomberg point out the International Monetary Fund last month forecast emerging economies will expand 6.9 percent in 2008, compared with 1.5 percent growth in the U.S. while they anticipate that China will expand 10 percent. I would say the points to watch here are the slowdown in Europe, and the inflation problem which is steadily extending its grip from the Baltic States - where the fire first broke out - across Central and Eastern Europe (via Ukraine and Russia) and now onto China. This whole issue raises real downside doubts on that 10% China number, and also raises the spectre of a major correction in Russia and Eastern Europe at some point.