News Room - Business/Economics

Posted on 25 Jun 2009

Japan export rebound slows as global demand weak

A rebound in Japanese exports slowed in May as shipments to China deteriorated and US demand remained weak, suggesting hopes for a quick recovery in global demand may be premature.

 

Though exports are now showing signs of bottoming out after a period of paralysis in the wake of the financial crisis, there has been little recovery in global demand except for buying partly based on windfall demand from stimulus packages around the world.

 

A revival in demand in major Western markets is key for a strong global rebound, but grim data from the United States and Europe on Monday suggested those economies may not yet be near a recovery. Many export-reliant Asian countries have also pinned their hopes on resurgence in China.

 

”In light of Japan’s demographics and industry structure, it’s hard to expect a recovery driven by a large expansion in domestic demand. Therefore we will continue to rely on foreign demand,” Bank of Japan policy board member Seiji Nakamura said yesterday after the trade data.

 

“Recovery in overseas economies will likely be moderate and it will take considerable time for the Japanese economy to make a full-fledged recovery,” Nakamura said, adding that Japan could likely return to growth in the second quarter.

 

The 40.9% fall in the value of Japanese exports in May from a year earlier was worse than the 39.1% fall markets had expected, though the bigger decline may also be due to a stronger yen.

 

Still, the pace of annual falls in exports has slowed after a 49.4% tumble in February, as companies have reduced their inventories, and analysts said the month-on-month comparisons showed a continued recovery in exports.

 

The real export index, calculated by the Bank of Japan, climbed 5.1% in May following a 7.9% rise in April, but it is still down more than 30% from a year ago.

 

The trade surplus also rose to 299.8 billion yen, the highest level in a year, signalling that net exports will likely make a positive contribution to GDP in April-June, after having made a huge dent in the two preceding quarters.

 

Expectations are growing that export-driven Japan may already be out of recession technically, with the economy seen growing 0.4% in April-June after four straight quarters of contraction through January-March.

 

But none of these signs have dispelled concerns that any recovery will be weak and possibly erratic, compared with the robust growth before the global crisis as US consumers no longer borrow heavily to spend.

 

Japanese exports to the United States fell 45.5% in May from a year earlier, less than a 46.3% fall in April.