Japan’s September exports post first fall in 10 months

Japan's exports fell for the first time in 10 months in September, data showed on Thursday, a worry for policymakers as any prolonged weakness in global demand will delay plans for a further interest rate hike.

Soft demand in China and slowing U.S. growth have been cited by analysts as a key risk factor for Japan's export-reliant economy and one that could complicate the central bank's path toward fully exiting years of ultra-easy monetary policy.

Total exports dropped 1.7% year-on-year in September, Ministry of Finance data showed, missing a median market forecast for a 0.5% increase and following a revised 5.5% rise in August.

Exports to China, Japan's biggest trading partner, fell 7.3% in September from a year earlier, while those to the United States were down 2.4%, the data showed.

Imports grew 2.1% in September from a year earlier, compared with market forecasts for a 3.2% increase.

As a result, Japan ran a trade deficit of 294.3 billion yen ($1.97 billion) for September, compared with the forecast of a deficit of 237.6 billion yen.

Bank of Japan (BOJ) Governor Kazuo Ueda has highlighted external risks such as U.S. economic uncertainties in his recent dovish commentary, emphasising that policymakers can afford to spend time scrutinising such risks in timing the next interest rate hike.

While the BOJ is expected to keep interest rates steady at its Oct.30-31 meeting, it will roughly maintain its forecast for inflation to stay around its 2% target through March 2027, according to sources familiar with its thinking.

Nevertheless, a quarterly central bank survey suggested the headwinds from the slowing global economy have yet to be fully felt by manufacturers, with the business mood holding up and companies retaining robust spending plans.

That opens up the risk that things could get much bumpier in the coming months, especially as worries over slow global growth join nervousness around the outcome of the U.S. presidential election next month and an escalating conflict in the Middle East.

($1 = 149.5400 yen)