China Demand Lifts Japan’s Exports to First Gain Since 2018

The YM Inauguration container ship berthed at a shipping terminal at night in Yokohama, Japan, on Monday, Dec. 14, 2020. Japan is scheduled to release trade balance figures on Dec. 16. Photographer: Kiyoshi Ota/Bloomberg
The YM Inauguration container ship berthed at a shipping terminal at night in Yokohama, Japan, on Monday, Dec. 14, 2020. Japan is scheduled to release trade balance figures on Dec. 16. Photographer: Kiyoshi Ota/Bloomberg

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Japanese exports gained in December for the first time in just over two years, with shipments to China climbing even as the pandemic resurged in other key markets.

The value of overseas shipments rose 2% compared with a year earlier, snapping a 24-month losing streak that came amid trade wars and the coronavirus, the finance ministry reported Thursday. Economists had predicted a 2.4% increase.

Gains were led by exports of plastic, non-ferrous metals and equipment for making semiconductors, while car shipments declined.

Demand from China, which has managed to contain the virus and last quarter roared back to pre-pandemic growth rates, has given key support to global trade and to Japan’s export-reliant economy.

Still, the accelerating spread of coronavirus in the U.S. and Europe since the start of the year makes the trade outlook precarious.

Key Insights

  • “The first export pickup in a while provides some relief but we’re far from being in a position to be optimistic about the outlook,” said economist Takeshi Minami at Norinchukin Research Institute. “It’s hard to imagine that China alone can accelerate growth in Japan’s exports.”
  • Still, improved trade is a positive sign for Japan’s economy because exports have supported the recovery since the start of the summer, while the service sector has struggled and is likely to weaken further.
  • Rising infection rates in Japan last week forced Prime Minister Yoshihide Suga to widen a state of emergency to cover areas of Japan accounting for about 60% of the economy, a move that hits restaurants, hotels and retailers especially hard. Analysts now expect the recovery to go into reverse this quarter.
  • Damage to Japan’s service sector puts added pressure on exports and manufacturing to lift the economy out of its slump, but beyond China key overseas markets are struggling. Virus cases continue to surge in the U.S. and Europe, even as vaccination drives get underway.

What Bloomberg Economics Says

“Looking ahead, we expect the recovery in exports to slow in January as demand from Europe and the U.S. sputters due the impact of the pandemic.”

--Yuki Masujima, economist

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  • Exports to China rose 10.2% from a year earlier, while shipments to the U.S. fell 0.7% and those to the EU dropped 1.6%
  • Exports of semiconductor equipment increased about 10%, accounting for a fifth of the overall advance.
  • Vehicle shipments dropped 4.2%.
  • The trade balance was 751 billion yen ($7.3 billion) in the black compared with a consensus forecast for a 930.5 billion yen surplus.
  • Imports held up better than expected but still fell 11.6%, a slightly larger fall than in November that points to ongoing weakness in domestic demand.
  • Shipment figures for the full year showed China and Hong Kong were the biggest destination for Japan’s exports in 2020, with 27% of the total.

(Adds import figures.)