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Japan export growth stands still in June

24/07/2003 13:23
Japan's export growth came to a standstill in June as demand faltered in the United States and Asia, its top two markets, clouding recent optimism over a possible recovery in the economy.

Exports were flat from the same month a year earlier after 13 straight months of increases, while in volume terms they fell for the first time in 16 months, Ministry of Finance figures showed on Thursday.

The figures are the first piece of bad news for the Japanese economy in several weeks, and cast a shadow over hopes that recent improved business investment and rising stock prices meant the beginning of the end of 10 years of stagnation.

"The export figures are surprisingly low, although I think it's too early to say they are going downhill," said Toshikimi Kaneki, an economist at Sumitomo Trust and Banking.

"It's somewhat puzzling because U.S. consumption is still said to be resilient. Exports to Asia seem less brisk than in recent months, but it's not possible to continue 20 percent growth for ever anyway."

Exports are a key driver of growth in the Japanese economy, and demand for Japanese cars and electronics from Asian countries in particular has helped offset poor business conditions at home.

Although demand from China remained firm in June, exports to Asia as a whole rose just 3.8 percent, the fourth straight month of declining growth since February's 24.7 percent rise.

SARS EFFECT

The figures may reflect the effects of the SARS outbreak in Asia earlier this year, a Finance Ministry official told a briefing.

"Exports to Asia have reached the point where the trend appears to be turning over, which poses some cause for concern in the near term," said Ryo Hino, economist at JP Morgan.

Japan's exports to the United States, still its largest single market despite the surge in trade with China, fell 12 percent in value terms and 10.6 percent in volume, an indication that all may not be well in the world's largest economy.

Falling exports and an increase in imports cut Japan's customs-cleared trade surplus by 30.7 percent in June from a year earlier to 846.040 billion yen ($7.12 billion).

The surplus was smaller than a median forecast by economists polled by Reuters journalists of 1.0361 trillion yen.

The data raised some concern that Japan's gross domestic product for the April to June quarter may fall into negative territory.

"(The figures) certainly increase the possibility that GDP growth in the second quarter was negative," said Peter Morgan, chief economist at HSBC Securities. "At least in terms of a very short-term view it looks a bit weaker than expected."

Nevertheless, most analysts see a pick-up in both exports and the economy as a whole later this year, helped by an expected improvement in the United States.

U.S. Treasury Secretary John Snow boosted such hopes earlier this week when he said the economy was poised for a sharp acceleration later this year, a view that has been echoed recently by Japanese ministers and the central bank officials.