Japanese exports to the United States recorded recorded their biggest year on year drop in more than four years in March and shipments to Asia and Europe slowed, signalling the downturn which started in the United States may be gradually spreading throughout the global economy.
That would spell trouble for Japan’s export-reliant economy, where growth is already stalling, although the trade data did little to alter the prevailing market view that the Bank of Japan (BOJ) will leave monetary policy unchanged this year.
Underscoring U.S. recession fears, Wednesday’s data showed that exports to the United States fell 11.0 per cent compared with March last year, the biggest drop since November 2003, due to slack sales of Japanese cars.
Exports to Asia and China rose, but by the smallest percentages since mid-2005, casting doubt on the view that emerging economies will enjoy strong growth despite the U.S. problems.
Swap contracts on the overnight call rate are no longer pricing in any chance of a BOJ rate cut from the current 0.5 per cent by the end of the year. In fact, they point to the risk of a rate increase early next year. But some analysts say investors are going too far in shifting their focus to rate rises, especially with media reports saying the BOJ will more than likely downgrade its growth forecast in an upcoming review of its policy framework.
Especially noteworhy was the drop in Japan’s trade surplus, which fell 30.2 per cent in March from a year earlier to 1.119 trillion yen ($10.88bn).
Exports to Asia rose 1.9 per cent in March from a year earlier, a steep fall from the 13.8 per cent logged in February. That was mostly due to a sharp slowdown in exports to China, with growth of 3.2 per cent in March after 14.8 per cent in February.
Japanese semiconductor exports to Asia fell 18.6 per cent in March, reflecting sharp declines in chip prices due to a supply glut and lower demand for personal computers.
The only significant countries to increase their annual rates of purchases of Japanese products were Russia (up 54.5%) and Chile (up 107.9% but from a very low base). Brazil (up 33.7%), Indonesia (up 20.8%), India (up 19.7%) and Vietnam (up 38%) all maintained strong growth trends, even if the rate of increase fell back in each case from February.
