Japan’s last monthly trade data is a good illustration of this complicated export environment. In August, the country faced a worse-than-expected drop in exports. Overall, exports were down 0.1% from last year. That 2.1% decline was a considerable improvement from the 1.9% decrease that economists polled by Reuters had expected. This is the fourth straight month of decreased exports for Japan.
The report signals the end of an era, noting the dramatic decrease in Japan’s exports to the United States. They plummeted 13.8% from where they were last year at this time. One of the impacted sectors was Japan’s autos exports, a key pillar of its economy which experienced severe hits. Demand for U.S. shipments tanked by 28.3% over the last year. The recently negotiated trade agreement between Japan and the United States, finalized in late July, cut tariff rates on Japanese EUC from 25% to 15%. Despite this very positive change, a decline was inevitable.
Japan’s trade with mainland China — its largest trading partner — saw a modest drop. Exports fell by 0.5%. Japan’s exports to Hong Kong skyrocketed, posting a significant 14.4% YoY increase. This rapid growth in exports to Hong Kong is part and parcel with changing trade flows inside Asia.
Overall, Japan’s exports to Asia as a region were up 1.7%, showing some degree of resiliency in the face of deeper regional challenges. Shipments to Western Europe got the biggest jump, jumping up by 7.7%. This 67 percent increase makes the already complicated landscape of Japan’s trade competitiveness that much moreso.
Japan’s imports fell significantly, by 5.2% yoy. This drop was a positive development relative to the 7.4% contraction seen in July. The import contraction’s slower pace might provide good news for the broader economy. This suggests that even with weak exports, the good news is that domestic demand seems to be stabilizing.
The mixed bag seen in Japan’s trade data demonstrates the continued challenges and opportunities present in today’s global market. Analysts will be watching closely what becomes of these trends. They will set the stage by discussing the opportunities and consequences presented by the new U.S.-Asia trade deal and Asia’s changing political landscape.