By Daniel Leussink – Japan Today
Japan’s imports from China fell at their fastest pace in three decades in February, as the coronavirus ground factory production in Asia’s largest economy to a halt and damaged wider demand across the region.
Data released on Wednesday showed Japan’s exports slipped 1.0% from a year earlier, the 15th straight month of decline and the longest run since a 23-month stretch to July 1987.
Imports fell 14.0%, dragged by a 47.1% tumble in goods from China, the largest such drop since August 1986 as the world’s second-largest economy went into lockdown due to the spreading coronavirus. Two-way trade between the two countries was worth 33.14 trillion yen ($309.23 billion) in 2019.
While the extreme plunge in imports in February is likely to recover as Chinese factories slowly restart, analysts fear the global spread of the virus since then will pose an even greater challenge to Japan’s trade-reliant economy as shutdowns worldwide close businesses and national borders.
“Activity in China has started to recover but the country’s import levels are low,” said Takeshi Minami, chief economist at Norinchukin Research Institute.
“Demand and production conditions around the world are falling. That may lead to a halt of exports (from Japan) going forward,” he said.
The 1.0% decline in total exports was due to weaker U.S.-bound shipments of cars and metal processing machinery to China.
The fall followed a 2.6% decrease in January and was smaller than a 4.3% decline expected by economists, with some segments such as non-ferrous metals and semiconductors posting stronger shipments.
The sharp fall in imports meant Japan’s trade surplus widened to 1.110 trillion yen ($10.34 billion), its largest since September 2007 and bigger than the median estimate for a 917.2 billion yen surplus.
The data is among the first real signs the world’s third-largest economy is struggling with the wider impact of the coronavirus. Many Japanese companies complained about the closing of factories in China and declining trade in a Reuters survey published on Wednesday.
“The novel coronavirus infection is affecting economic activity in China. We think there is a likelihood that especially impacted imports,” a finance ministry official said at a news briefing.
The data followed a survey the previous day that showed Japanese business confidence slumped to decade lows in March.
In addition to the virus, Japan’s economy is struggling with a hit to consumer demand from a sales tax hike last year as well as the lingering uncertainties that followed the Sino-U.S. trade war.
Minami from Norinchukin Research Institute said the fall in goods for China could also hit consumers if household good prices rise due to dwindling retail supplies. The biggest drags on Japan’s imports from China were clothes and communication devices such as mobile phones.
By region, Japan’s exports to China fell only 0.4% year-on-year in February largely due to the timing of the Lunar New Year holiday, which was held in February last year but officially began this year on Jan. 25.
That was the likely reason behind a sharp 6.4% fall in China-bound shipments in January and that, in turn, limited the decline in exports in February, analysts said.
Exports to Asia were up 1.7%, rising for the first time in 16 months.
U.S.-bound shipments, a key destination for Japanese cars and electronics, dropped 2.6% in February, posting a seventh straight month of declines due to falling exports of 3,000-cc cars and semiconductor production equipment.