JAKARTA (TheInsiderStories) – Japan’ trade deficit narrowed by 69.6 percent in annual basis (YoY) to JPY136.3 billion (US$1.3 billion) in August on a non-seasonally adjusted basis but rose by 25.8 percent from the previous month to JPY130.8 billion for the fifth consecutive month. The narrower deficit from a year ago reflected a faster decline for imports (down 12.0 percent YoY) than exports (down 8.2 percent YoY).
While, exports and imports declined at a similar pace in volume terms (down 6.0 percent YoY and 6.2 percent YoY, respectively). The accelerated decline for imports partially reflected declines for import prices of oil and other commodities.
Sluggish exports were due largely to a 10.9 percent YoY decline for exports to Asia, particularly to China, mainly because of contractions for exports of auto parts, semiconductor machinery, and iron and steel. While growth of exports to the US turned negative (down 4.4 percent YoY) for the first time in eleven months, declines for exports of autos and auto parts were partially offset by solid increases for exports of semiconductor machinery, audio and visual apparatus and parts, and some other machinery.
The major contributor to the contraction of imports was imports of crude oils, natural liquid gas, and other mineral fuels. The weakness also reflected declines for imports of clothing and accessories, mobile phones, and some machinery after solid increases in the previous year.
Harumi Taguchi, principal economist at IHS Markit rated, although the August exports declined at a faster pace, the annual contraction for the three-month average of export volumes narrowed for a third consecutive month to a 3.3 percent drop compared to last year.
The softer decline in trend was in line with somewhat improved JP Morgan World Manufacturing Purchasing Mangers’ Index (although it remained below 50), as well as the export order index in the Jibun Bank Manufacturing Purchasing Managers’ Index Survey in August.
That said, repercussions from United States (US) – China trade tensions are likely to continue and prolong global uncertainties will make it difficult to see a recovery of exports over the near term.
Solid exports of some items to the US reflected moves to transfer of production in order to avoid repercussions from US – China trade war and possible downside effects from ongoing US – Japan trade talks, but slower global demand, particularly from China, could continue to weigh on Japan’s exports.
While sluggish exports and weaker consumer spending following the consumption tax increase in October 2019 could also hinder imports, Japan’s trade deficits are likely to persist over the near term.
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