Japan's exports slumped for the eighth consecutive month in May on an annual basis, with even shipments to China showing little sign of improvement, suggesting hopes for a quick recovery in global demand may be premature.
Though exports are now falling less after a period of paralysis in the wake of the financial crisis and showing signs of stabilising on a month-on-month basis, there has been little rebound in global demand for cars and electronics.
A revival in demand in major Western markets is key for a strong global rebound but grim data from the United States and Europe on Monday suggested those economies may not yet be near a recovery. Many export-reliant Asian countries have also pinned their hopes on a resurgence in China.
“In light of Japan's demographics and industry structure, it's hard to expect a recovery driven by a large expansion in domestic demand. Therefore we will continue to rely on foreign demand,” Bank of Japan policy board member Seiji Nakamura said today after the trade data.
“Recovery in overseas economies will likely be moderate and it will take considerable time for the Japanese economy to make a full-fledged recovery,” Nakamura said, adding that Japan could likely return to growth in the second quarter.
The 40.9 per cent fall in the value of Japanese exports in May from a year earlier was worse than the 39.1 per cent fall markets had expected, though the bigger decline may also be due to a stronger yen. On a seasonally adjusted basis, exports fell 0.3 per cent in May from April on a value basis.
Still, the pace of annual falls in exports has slowed after a 49.4 per cent tumble in February, as companies have reduced their inventories, and some analysts said the month-on-month comparisons showed a continued recovery in exports.
Tatsushi Shikano, senior economist at Mitsubishi UFJ Securities, said exports rose 3.3 per cent by volume from the previous month on a seasonally adjusted basis.
“Looking at the trend on month we can see that export volume to both China and the West has picked up, thanks to stimulus in China and rapid progress in unwinding of excess inventories," he said.
“This suggests that May industrial output data will come out strong as expected next week.”
The Bank of Japan's tankan business survey due out on July 1st is expected to show a rebound in the mood among big Japanese manufacturers, after industrial production jumped at its fastest rate in more than half a century in April.
Expectations are growing that export-driven Japan may already be out of recession technically, with the economy seen growing 0.4 per cent in April-June after four straight quarters of contraction through January-March.
Still, none of these signs have dispelled concerns that any recovery will be weak and possibly erratic, compared with the robust growth before the global crisis as US consumers no longer borrow heavily to spend.
Reuters