April 22, 2015, 19:30 JST

Japanese exports held down by sluggish shipment to China

Japanese exports growth is failing to pick up speed. In March, Japanese export grew by 8.5% year on year, but the growth remains mostly a nominal phenomenon, a reflection of the declining yen. In a real term, the quantity of exports in March is merely up by 2% from the average of 2014 and still well below the prevailing level in 2012. 

By area, we can see that weak exports to China is the main culprit for the sluggish growth of the Japanese exports. The quantity of exports to China is down 0.8% year on year in March. When you observe the trend of Japanese exports to China, you could see that the quantity of Japanese exports to China has been on a moderate downtrend in the last few years. After a seasonal adjustment, the level of the quantity of exports to China is now 20% less than the average level in 2010. It is actually quite astonishing how much Japan is losing its market share in China. 

On the other hand, Japanese exports to US and to Europe are doing well. Japanese export volume to US is up 5.9% year on year in March. For EU area, it is up 13.7% year on year in March.

On the import side, Japanese imports are declining both in quantity and in value. The quantity of imports is down 10.3% year on year in March and down 14.5% year on year in value. The decline in imports does lead to an improvement in Japan's trade balance, but it is certainly not a good news as it may reflect a weakening demand in Japan. Overall, the March trade data implied a rather sluggish industrial activities in Japan in March.

The results from the March trade data must be disappointing for Mr Kuroda. The weak yen has so far led to Japanese manufacturers to enjoy record profits, but its effect on economic activities has been rather modest. 

While we believe that patience, rather than an additional monetary easing, is required in the current circumstances, the BoJ may need to consider implementing an additional easing if the incoming economic data keep pointing to an economy with no growth momentum.