Japan’s Exports Fall at Single-Digit Pace as Trade Improves

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(Bloomberg) -- Japan’s exports decreased at a single-digit pace for the first time in seven months in September in another sign that the pandemic’s impact on global trade is easing.

The value of Japan’s overseas shipments fell 4.9% from a year earlier in September, narrowing from a 14.8% drop in August, the finance ministry reported Monday, offering an indication that the low point for virus-hit trade has passed. Economists had projected a 2.4% decline.

Key Insights

• The return of activity in China, the first country hit by the virus and the first to bounce back, has tempered overall declines in recent months. Shipments to China rose for a third straight month.
• New Prime Minister Yoshihide Suga faces the challenge of trying to revive the economy after it shrank by a record in the second quarter. His success will greatly depend on exports, a key driver of Japanese growth.
• Third-quarter growth is unlikely to make up for the depths of declines in the second quarter, an outcome that could put pressure on Suga to compile another stimulus package. Some 85% of economists surveyed by Bloomberg expect a third extra budget before year-end.
• Japan’s virus numbers have stabilized lately, allowing the government to push forward with various national campaigns to support spending. Still, the economy’s reliance on global trade makes it vulnerable, especially with the virus resurgence in some key trade partners such as Europe and the U.S.

What Bloomberg’s Economist Says

“Looking ahead, we expect exports to continue their recovery in 4Q but at a slower pace due to fading pent-up demand from the U.S. Imports will probably recover at a slightly faster pace, supported by the government’s support for domestic tourism.”

--Yuki Masujima, economist

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• Overall shipments to the U.S. eked out a 0.7% gain from a year earlier, while those to the EU fell 10.6%. Exports to China rose 14%, after increasing 5.1% in August.
• Imports dropped 17.2%. Analysts had forecast a 21.4% decline.
• The trade balance was a 675 billion yen ($6.4 billion) surplus. The projection was for a 980.7 billion yen surplus.

(Updates with more detail)

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