Japan: Export Growth Slows on Weak US

After some signs of stabilisation in recent months, export growth slowed again in August. The overall picture for export growth is that Japanese exports in Q3 will not perform as poorly as in Q2 but nonetheless real export growth remains in negative territory (see chart 2). In our latest forecast we have assumed a slight recovery in exports in Q3 on the back of the sharp decline in Q2. Hence, there could even be some downside risk to our forecast of only 0.1% q/q GDP growth in Q3.

Looking into details, the weakness in exports was mainly driven by renewed weakness in exports to the US (see chart 4). This development is consistent with the impact from tax rebates in the US starting to fade. Export to Asia remains the brightest spot. Overall Asian exports have recovered somewhat in Q3 after being hit hard in Q2.

The Japanese trade balance continues to deteriorate sharply on soaring import growth (see chart 1). Seasonally adjusted, the trade balance turned in a minor deficit in August. The main explanation of course is higher crude oil and commodity prices. That said, import volumes have recovered slightly in recent months (see chart 2). However, with recent declines in crude oil and commodity prices, we will probably see some improvement in the trade surplus in the coming months.

Danske Bank
http://www.danskebank.com/danskeresearch

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