December custom cleared trade: Japanese exports to China continues to plummet

Jan. 24, 2013, 13:00 JST

Summary

Weakening yen is yet to result in a better export performance. Exports to China continue to plummet, while the recovery in exports to US remains at a snail speed. Japanese imports remain stable, reflecting the stable domestic demand. Japan continues to run trade deficits equivalent to 2% of GDP in annual terms. In our view, trade deficits will remain a feature of Japanese international trade until the domestic demand weakens in mid 2014 due to a likely fiscal contraction.

 

Overview: Exports remain at one of the lowest points since 2010

Demands for Japanese exports remain weak. On seasonally adjusted terms, exports did rise by 2.3% month on month (MoM) in December. As you could see from the chart below, it still remains at one of the lowest points since Japanese exports started to recover in 2010. On year on year (YoY) terms, exports are down 5.8% YoY, imports rose by 1.2% MoM in December and by 1.9% YoY. On seasonally adjusted terms, Japan ran a trade deficit of 801 billion yen in December, a modest improvement from 852 billion yen in November.

 

Japanese exports remain depressed

 

Source: MoF, CEIC, JMA

 

By countries, exports to China shrunk yet again in December by 6% MoM on seasonally adjusted terms. It is down 15.8% YoY. Exports to US are starting to grow, but very slowly. While we do expect exports to do better thanks to the weakening yen, it is yet too early to see the benefit in figures. Exports to EU remain depressed at -11.1% YoY. With the shrinkage, the size of Japanese exports to EU is now merely 23% larger than Japanese exports to South Korea alone. Among Japanese export destinations, Thailand is the only country to which exports are growing visibly (up 35% YoY) due to the reconstruction demand and low base effects after the flood in late 2011.   

 

Export to China has not stopped plummeting

Source: MoF, CEIC, JMA

 

Japan continues to run trade deficit to the annual tune of 2% to GDP 

Source: MoF, CEIC, JMA

 

Summary: Trade deficits probably last until mid 2014

While it is marginally encouraging to see exports to U.S. starting to grow again, overseas demand for Japanese exports are still in a dismal state. In comparison, Japanese demand for imports remains stable. Outside fossil fuel, imports are up 0.4% YoY. 

 

The defining theme in Japan’s international trade continues to be that of a weak overseas demand versus a stable domestic demand, resulting in a large trade deficit. In our view, trade deficit is likely to remain a feature of Japanese trade until mid-2014 when Japanese domestic demand likely weakens due to fiscal contraction.