Japan’s goods trade deficit in the January to June period shrank 77.4 percent from a year earlier to ¥1.73 trillion ($13.9 billion), due partly to smaller imports on the back of declining crude oil prices, the government said Thursday.
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Meanwhile, South Korea’s benchmark KOSPI fell 0.1% to 2,062.56 after the Bank of Korea said the economy grew just 0.3% in the second quarter compared to the previous three months as a result of falling exports and the deadly outbreak of the Mers virus.
The depreciation of the yen, which mechanically inflates the revenue collected overseas when converted into Japanese currency, also had a positive effect: in terms of volume, there was a stagnation. “Inventory adjustments in China don’t bode well for Japanese exports”.
“I expect gradual recovery in exports but there are downside risks, because exports to China may not do that well”, said Shuji Tonouchi, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities.
Japan’s exports to the key North American market were up 16.9 per cent over the first half of the year, 5.1 per cent to European Union countries while exports to China rose a less robust 2.2 per cent since January, the data showed. Policymakers are counting on exports to supplement Japan’s domestic-demand driven economy, but China’s slowdown could curb Japan’s growth by slowing its exports. Japan’s exports to the United States rose an annual 17.6 percent in June, far above the 7.4 percent seen in May, thanks to higher shipments of cars and pharmaceuticals.
Marcel Thieliant from Capital Economics warned that the beneficial impact of falling gas and oil prices on Japan’s trade balance was running out of steam as the yen continues to weaken against the dollar.
The world’s third-biggest economy logged a deficit of 69 billion yen (557 million U.S. dollars) in the reporting month, down significantly from last year’s deficit of 834.1 billion yen.
“Export volumes have been struggling to rise despite the weak yen”, said Atsushi Takeda, an economist at Itochu Corp.
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The figures were measured on a customs-cleared basis.
