Japan's export growth slows as US shipments drop for first time in three years

Japan’s economic landscape showed mixed signals in August, with a notable slowdown in export growth and a surprising decline in machinery orders.

In August, Japan experienced a significant slowdown in export growth, with shipments to the US falling for the first time in nearly three years. Additionally, machinery orders unexpectedly dropped in July, signaling potential difficulties for an economy struggling to recover, Caliber.Az reports, citing foreign media. 

The weaker external demand poses challenges for Japan’s efforts to achieve stable economic growth, particularly given the looming risks of a slowdown in the US and ongoing weakness in China—both key trading partners. "Japan's exports are likely to face difficulties as the global economy fails to gain momentum, with anticipated slowdowns in both the US and Chinese economies next year," noted Takeshi Minami, chief economist at Norinchukin Research Institute. He added that the previous boost from the weak yen has diminished, as the Japanese currency strengthened sharply in August.

Total exports rose by 5.6 per cent year-on-year in August, marking the ninth consecutive month of growth. However, this was below the market forecast of a 10 per cent increase and down from a 10.3 per cent rise in July. Exports to the US fell by 0.7 per cent, marking the first decline in almost three years, with auto sales plummeting by 14.2 per cent. Conversely, exports to China, Japan’s largest trading partner, increased by 5.2 per cent year-on-year in August. The volume of shipments also reflected a downbeat trend, with a 2.7 per cent decline from the previous year, marking the seventh consecutive month of decreases. 

Meanwhile, the value of imports grew by 2.3 per cent in August, falling short of the anticipated 13.4 per cent rise. Consequently, Japan’s trade balance recorded a deficit of 695.3 billion yen ($4.90 billion), better than the projected deficit of 1.38 trillion yen. In a separate report, core machinery orders unexpectedly fell by 0.1 per cent in July compared to the previous month, defying economists' expectations of a 0.5 per cent increase. Compared to the previous year, core machinery orders—an erratic data set often seen as a gauge for future capital spending—rose by 8.7 per cent, surpassing the 4.2 per cent increase anticipated by economists. 

Despite this, the government maintained its view that the recovery in machinery orders remains stagnant. Japan's economy rebounded strongly in the second quarter due to increased personal consumption, but growth projections were slightly downgraded last week. The economic fragility is further highlighted by a Reuters monthly poll, which revealed that business confidence among major Japanese manufacturers dropped to a seven-month low in September. Managers across various sectors expressed concern over weak demand from China. 

By Naila Huseynova