🐂 Not all bull runs are created equal. November’s AI picks include 5 stocks up +20% eachUnlock Stocks

Japan's exports slow sharply, machinery orders shrink in blow to economic recovery

Published 09/17/2024, 07:58 PM
Updated 09/17/2024, 11:36 PM
© Reuters. FILE PHOTO: Stacked containers are seen at an industrial port in Tokyo, Japan February 15, 2024.  REUTERS/Issei Kato/File Photo

By Makiko Yamazaki and Satoshi Sugiyama

TOKYO (Reuters) -Japan's export growth slowed sharply in August as shipments to the U.S. dropped for the first time in three years, while machinery orders unexpectedly shrank in July in a worrying sign for an economy struggling to mount a solid recovery.

The frail external demand undermines Japan's quest to drive sustainable economic growth, analysts say, especially given a growing risk of a slowdown in the U.S. and further weakness in China's economy, two major trading partners.

"Japan's exports are bound to struggle as the global economy is failing to pick up momentum, with growth in both the U.S. and China economies seen slowing down next year," said Takeshi Minami, chief economist at Norinchukin Research Institute.

He said a boost from the weak yen to exports has faded as the Japanese currency rebounded sharply in August.

Total exports rose 5.6% year-on-year in August, up for a ninth straight month, data showed on Wednesday, well below a median market forecast for a 10% increase and following a 10.3% rise in July.

Exports to the United States dipped 0.7%, the first monthly decline in nearly three years, as auto sales slumped 14.2%.

Those to China, Japan's biggest trading partner, rose 5.2% in August from a year earlier.

The overall picture in terms of volume also provided for sombre reading, with shipments down 2.7% last month from the year-ago period, the seventh consecutive month of declines.

The value of imports grew 2.3% in August from a year earlier, versus a 13.4% increase expected by economists.

As a result, the trade balance stood at a deficit of 695.3 billion yen ($4.90 billion), compared with the forecast of a deficit of 1.38 trillion yen.

Separate data from the Cabinet Office showed core machinery orders unexpectedly declined 0.1% in July from the previous month, confounding a 0.5% rise expected by economists in a Reuters poll.

Compared with a year earlier, core orders, a highly volatile data series regarded as an indicator of capital spending in the coming six to nine months, rose 8.7%, blowing past a 4.2% increase seen by economists.

The government stuck with its assessment on machinery orders that recovery is at standstill.

A rise in personal consumption helped Japan's economy rebound strongly in the second quarter from a slump at the start of the year, but the growth was revised down slightly last week.

In a sign of the economic fragility, a Reuters monthly poll showed last week that business confidence at big Japanese manufacturers sank to a seven-month low in September, with managers across a wide range of sectors citing soft Chinese demand as a concern.

© Reuters. FILE PHOTO: Stacked containers are seen at an industrial port in Tokyo, Japan February 15, 2024.  REUTERS/Issei Kato/File Photo

The Bank of Japan is expected to keep monetary policy steady at a two-day meeting that ends on Friday, but signal that further interest rate hikes are coming and highlight progress the economy is making in sustaining inflation around its 2% target.

Norinchukin's Minami said economists generally expect consumption to support Japan's growth but "with little hope for a boost from exports, the momentum of recovery would be weak."

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.