Japan’s Exports Fall Most Since January as Trade Fights Weigh

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Japanese exports dropped the most since January as China’s slowdown, the trade conflict between Washington and Beijing and softness in the global tech sector continued to weigh on overseas demand.

The value of shipments abroad fell 8.2% in August from a year earlier, according to the finance ministry. Economists surveyed by Bloomberg had estimated a 10% drop. Shipments to China suffered the second-largest drop in the last three years with sharp falls in chip-making equipment continuing. The trade balance showed a deficit of 136.3 billion yen.

Key Insights

• Slowing demand overseas, especially in China, has weighed on Japan’s exports, one of the economy’s main drivers of growth. The U.S.-China trade war makes the outlook for Japanese shipments uncertain, while Japan and South Korea have their own tensions.
• The threat of possible U.S. tariffs on Japanese cars and auto parts is another cause of uncertainty. President Donald Trump said a trade deal with Japan had been reached earlier this week, but didn’t say whether it would end his auto-tariff threat. Japan’s foreign minister, Toshimitsu Motegi, said Tokyo wants any deal to lay the issue to rest.
• Weak exports make Japan’s economy particularly vulnerable at a time when the nation’s households are bracing for next month’s sales tax hike. Consumer spending has supported growth recently.
• Shipments to South Korea fell 9.4%, fallout from the trade dispute between the two neighbors as tensions over Japan’s colonial past continue to simmer. Food exports, including beer, which has been boycotted by some South Koreans, slumped 41%.

What Bloomberg’s Economists Say

“Looking ahead, the stronger yen and slowing Asian demand are likely to hurt exports. A key risk -- pending trade talks with the U.S. to head off tariffs on Japanese autos. With the sales tax set to rise in October, imports of consumer goods may increase.”
--The Asia Economist Team
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• Imports fell 12% in August, versus economists’ median estimate of a 10.7% drop.
• Exports to China dropped 12.1% in August, while shipments to the U.S. decreased 4.4%.
• Exports of chip-making equipment to China slid 38.7% and by 24.5% overall.

--With assistance from Toru Fujioka.

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

To contact the editors responsible for this story: Malcolm Scott at mscott23@bloomberg.net, Jason Clenfield, Henry Hoenig

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