March 18, 2015, 13:00 JST

Slowdown in China affecting Japanese exports

Japanese exports experienced a setback in February. Exports grew only by 2.4% year on year in February, a significant slowdown from the 17.0% year on year expansion in January. The slowdown mostly stemmed from the contraction in the exports to China. In February, exports to China contracted by 17.3% year on year, a dramatic turn-down from the 20.8% year on year expansion in January.

Source: MoF, JMA

What caused the slowdown?  

The timing of the Chinese new year explains a large part of the dip. This year, the Chinese new year fell on February 19, and the slowdown in shipping activities around the new year's day fell entirely in February. In comparison, in 2014, the new year's day fell on January 31 and some of the slowdown in activities took place in the last week of January. The importance of the Chinese new year effect can be observed when we compare exports to China and exports to U.S. In February, Japan's export to US grew by 14.3% year on year, only marginally slower that the 16.5% year on year expansion in January.

Source: MoF, JMA

It would be a mistake to put all the blame for the slowdown on the timing of the Chinese new year though. Some of the dip in exports to China is likely a reflection of the weakening in economic activities in China. The pace of expansion in the industrial production in China in January-February was 6.8% year on year, the slowest pace since early 2009. Correspondingly, Japan's export volume to China in February was the lowest since the Lehman shock episode in 2008-9. In our view, the alarming pace of the economic slowdown in China in the first two months of 2015 should encourage Chinese policy makers to take some stimulus measures. Whether we see some signs of an economic recovery in March in China is something we need to pay close attention to.

Source: MoF, JMA

On the import side, the Japanese import value in February fell by 3.6% year on year, but the decline is largely due to the fall in commodity prices. In February, imports price fell as much as 9.9% year on year, according to the CGPI statistics from the BoJ. The volume of import are in fact growing. It grew by 4.5% on year on year terms. After a seasonal adjustment, imports volume rose for two consecutive months through January to February. In our view, this reflects a pick up in the pace of economic recovery in Japan. 

Source: MoF, JMA