TOKYO (Reuters) - Japan’s exports fell in May at the fastest pace since the global financial crisis as U.S.-bound car shipments plunged, bolstering expectations for a deeper contraction in the world’s third-largest economy this quarter.
Weak global appetite for cars and slowing business spending could drag on Japan’s export-led economy, as China-bound trade remains weak, dashing hopes mainland demand could offset the weakness seen in other major trading partners.
Official data out on Wednesday showed Japan’s exports fell 28.3% in the year to May, the largest slump since September 2009. The result was worse than a 26.1% decrease expected in a Reuters poll and extended double-digit declines for a third straight month.
U.S.-bound exports - Japan’s key market - halved to mark the biggest annual drop since March 2009, due to more than 70% declines in shipments of cars and car parts. Japan is the world’s second-largest exporter of autos.
“As Europe and America started to re-open, exports may have hit the bottom in May,” said Takeshi Minami, chief economist at Norinchukin Research Institute.
“That said, as new cases of infections have risen in Beijing, it’s hard to expect a steady recovery. If such a situation drags on, it will deal a body blow to small firms, raising the risk of rising bankruptcies and jobless in the latter half of the fiscal year.”
U.S.-bound exports fell to 588 billion yen ($5.48 billion), the lowest since February 2009, shrinking Japan’s trade surplus with the United States to 10 billion yen, the smallest since records began in January 1979.
Globally, automakers are struggling to recover from heavy lockdowns, which pummelled car demand. In Japan, Nissan Motor Co. 7201.T has announced plans to slash production capacity and its model range by about a fifth to help cut costs, following a slide in sales.
“We were expecting a tough year this year and next for the U.S. market even before the coronavirus hit, but the virus has sped up the decline,” said Koichi Kawaguchi, Tokyo Managing Director at consulting firm Alix Partners. He expects it could take around seven years for sales to recover to 2019 levels.
Exports to China, Japan’s largest trading partner, fell 1.9% in the year to May, due to declines in chemical raw materials, cars and chip-making equipment. It followed the prior month’s 4% annual decline.
Shipments to Asia, which account for more than half of Japanese exports, declined 12%, and exports to the European Union also fell 33.8%.
Japan’s economy slipped into recession for the first time in 4-1/2 years in the first quarter and is on course for its deepest postwar slump as the pandemic ravages businesses and consumers.
The Bank of Japan on Tuesday increased its support through lending schemes for struggling businesses to $1 trillion, which follows the government’s $2.2 trillion in fiscal packages to rescue the economy.
While the central bank expects a gradual economic recovery in the second-half, the collapse in trade and bleak sentiment surveys suggest industries are a long way from a sustained comeback.
Analysts warn the current quarter will be especially dire after the coronavirus forced consumers to stay at home and businesses to close their doors.
Highlighting the pain the health crisis has inflicted on corporate morale, manufacturers’ confidence fell to its lowest in 11 years, the Reuters Tankan survey showed on Wednesday.
Reflecting weak domestic demand as well as the collapse in crude oil prices, overall imports fell 26.2% in the year to May, the biggest drop since October 2009, the trade data showed.
Reporting by Tetsushi Kajimoto; Additional reporting by Naomi Tajitsu; Editing by Sam Holmes
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