Japan: Exports kept contracting in June – UOB
Alvin Liew, Senior Economist at UOB Group, reviewed the latest data releases from the trade balance sector in the Japanese economy.
Key Quotes
“Japan’s exports continued to contract severely by 26.2% y/y in June… the 19th consecutive month of decline since December 2018, the longest stretch of monthly contraction since 1987. In comparison, the decline in imports was a more subdued at -14.4% y/y. That said, imports have been on the decline for 13 straight months since May 2019.”
“In line with the weak exports and a more modest decline in imports, Japan recorded another trade deficit, albeit a smaller one at JPY268.8bn for June (from a deficit of JPY838.2bn in May). On an adjusted basis, the trade balance showed a deficit of JPY423.9bn in June (from a JPY585.7bn in May).”
“While we believe the worst for Japan’s trade collapse to be in 2Q 2020, the subsequent recovery in 2H is likely to be on a gradual trajectory and the recovery path is laden with significant uncertainties in light of the evolving COVID-19 situation. Rising infection rates in the US and elsewhere with potential resurgence in other regions could hamper efforts to reopen economies and temporarily disrupt global supply chains again, leading to material disruptions in Japan’s huge manufacturing base while redeploying restrictions in major economies to contain the spread of COVID-19 will weaken demand for Japanese goods.”
“We have further revised our forecast Japan’s exports lower and will now contract by 16.6% in 2020 from previous forecast of -7.2% (+5.6% in 2019) while imports may contract by 11.7% from previous forecast of -8.7% (+5.0% in 2019). Based on these latest projections, Japan is likely to record a bigger trade deficit, amounting to JPY 7 trillion in 2020 (from a trade deficit of JPY 3.6 trillion in 2019).”