Japan’s exports slip in fresh sign of pressure on economy

Japan’s exports edged down for the first time in three months in November, in a fresh sign of pressure on the economy as it struggles to recover from a contraction over the summer.

Exports fell 0.2% from a year earlier as shipments of steel and chip-making equipment continued to fall, the finance ministry said Wednesday. Economists had forecast a 1.4% increase. Imports dropped 11.9% helped by further falls in the overall value of gas and coal purchases. That compared with the consensus for an 8.6% decline.

The trade deficit widened to ¥776.9 billion ($5.4 billion), 

The slip in exports amid a global slowdown suggests Japan’s economy may not get as much support from overseas demand as hoped to help it recover from its sharpest contraction since the height of the pandemic in the third quarter. 

The Bank of Japan noted in its October outlook report that exports and production “are projected to be more or less flat for the time being, affected by the slowdown in the pace of recovery in overseas economies.” That’s despite weakness in the yen, which would normally support overseas shipments.

“It will take time for external demand to recover, and domestic demand has also been sluggish for a while, especially demand for goods,” said Chisato Oshiba, an economist at Dai-Ichi Life Research Institute. “The absence of a driving force will continue to be a concern for the Japanese economy for some time.”

Wednesday’s data highlighted the patchy state of the global economy, with exports to the US rising 5.3% on year, while those to Europe were flat and shipments to China fell 2.2%. 

The Federal Reserve last week sent a clear signal that it’s ready to ease back on restrictive policy next year as it pursues a soft landing. In Europe, economists see a growing likelihood that the economy contracted in the fourth quarter, putting it in a technical recession. Meantime, recent economic indicators for China were not encouraging.

Activity in Japan’s factory sector appears to have been weakening again despite relatively strong figures in October. Manufacturing activity deteriorated in December to a level matching a three-year low according to early data, underscoring pessimism among product and component makers concerned about the outlook for overseas economies and weak domestic demand.

Still, Wednesday’s data also showed pockets of strength, with shipments of autos continuing to regain strength from a year earlier, rising more than 16% as an improvement in global supply-chains continued to support activity.