Japan’s export growth has hit its weakest pace in over two years in April, with shipments to China experiencing a slump amid concerns about faltering global economic demand. According to data from the Ministry of Finance, exports rose by a mere 2.6% in April compared to the previous year, falling short of economists expectations of a 3.0% increase. This marks the slowest gain since February 2021 when exports declined by 4.5%.
Japan, the world’s third-largest economy, recently emerged from a recession in the first quarter thanks to increased consumer spending and a revival in tourism following the easing of COVID-19 restrictions. However, weak exports are putting pressure on factory activity and hindering a broader economic recovery.
Despite experiencing growth every month since February 2021, exports have been affected by a stronger yen, which has made Japanese products less competitive. The decline in exports was further highlighted by the first quarterly slump in 18 months, as shown by the gross domestic product data for January-March. This decline of 4.2% in exports is expected to have a negative impact on capital spending and domestic demand.
Takeshi Minami, chief economist at Norinchukin Research Institute, warned that weakening exports will continue to weigh on capital spending, potentially dampening domestic demand as consumption lacks strength. In the latter half of this year, the global economy is expected to slow further, so neither domestic nor external demand can support the Japanese economy.
In terms of destinations, Japanese exports to China, the country’s largest trading partner, dropped by 2.9% in April compared to the previous year. This decline was primarily driven by decreases in car, car parts, and steel shipments. It marked the fifth consecutive month of falling exports to China. Similarly, Japan’s shipments to Asia fell by 6.3% year-on-year in April, experiencing a decline for the fourth consecutive month.
On a positive note, shipments to the United States and the European Union grew by 10.5% and 11.7% respectively, as the supply constraints eased and there was a rebound in the automotive sector.
In contrast, imports in April fell by 2.3%, significantly larger than the expected 0.3% decrease. This decline represents the first annual decrease in 27 months. The Japanese government’s trade deficit narrowed in the third quarter of 2018, which is good news.
The challenges posed by declining exports and the anticipated slowdown in the global economy in the coming months suggest that Japan’s economy is likely to face ongoing difficulties and remain in a vulnerable state.