JAKARTA (TheInsiderStories) – Japan’s trade balance recorded a surplus of JPY140 billion (US$1 billion) in September, following two consecutive months of deficits (on a non-seasonally adjusted basis), although the surplus narrowed by 78.7 percent year-on-year (YoY).
The trade balance recorded a deficit for a third straight month, widening by 25.1 percent month-on-month to JPY239 billion.
Exports declined by 1.2 percent in annual basis, marking the first decline in 22 months, which is in line with a 4.8 percent drop for export volumes that partially reflected disruption caused by the devastating Typhoon Jebi and the Hokkaido earthquake. Exports to Asia continued to rise while exports to the United States (US) and the European Union (EU) turned negative.
Major contributors to the decline were exports of autos (particularly to the EU), telecommunication devices (broadly, but largely to Asia), and construction machinery (to the US). Exports of machinery, particularly semiconductor-related machinery, to China continued to grow.
But declines in manufactured goods, semiconductors and other electrical machinery to China, suggest weaker Chinese production from the repercussions of additional US tariffs on its imported goods.
Although import volumes also declined by 2.7 percent compared to last year, the main factor lifting imports was higher prices (up 10.0 percent YoY), particularly for prices for oil and other fuels. Imports of fuel contributed to an increase of 7.6 percentage points, offsetting declines for imports of medical products, aircrafts, power generating machinery, and other products.
The sluggish September results suggest net exports made a negative contribution to real GDP growth for the third quarter of 2018, although the disruption caused by natural disasters could potentially lift exports in short term, rated by Harumi Taguchi, Principal Economist of IHS Markit.
That said, weak external demand and higher oil prices could keep Japan’s trade balance in deficit territory over the near term.
Although there are few signs of a rapid drop in overall external demand, export orders as shown in the Nikkei Japan Manufacturing Purchasing Managers’ Index has dropped below 50 three times in four months, suggesting weak orders from overseas could weigh on Japan’s exports over the near term. On the other hand, ongoing geopolitical risks could keep oil prices high and any pending US-Japan trade agreement could narrow the trade surplus with the US.
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