TOKYO: Japan's annual export growth slowed to its weakest pace in more than a year in January and the trade balance swung to a deficit for the first time in almost two years as shipments to China slowed, but economists say the central bank's forecast for an export-led recovery remains intact, according to Reuters.
Economists said the slowdown was likely to be temporary as underlying demand overseas was still strong and companies are likely to increase inventories.
Still, the data could be uncomfortable for the government and the Bank of Japan as turmoil in Libya and a recent spike in commodity prices cloud the outlook for export-reliant Japan.
Improvements in exports and industrial output prompted the government and the Bank of Japan to raise their economic assessments this month. But sluggish domestic demand and persistent deflation mean that the BOJ will stick to its ultra-easy monetary policy for the time being.
"China has started to tighten policy to slow its economy and this shows in January. China stopped tax breaks on cars in December, which also had an impact," said Takahide Kiuchi, chief economist at Nomura Securities.
"The slowdown in Japan's export growth in January is temporary and exports could continue as final demand overseas is still strong and the inventory cycle suggests there is more demand."
SHIPMENTS TO CHINA
The 1.4% annual rise in exports in January was much slower than the median forecast for a 7.4% annual increase and follows a 12.9% rise in the year to December.
Exports to Asia, which account for more than half of Japan's total exports, rose 0.4% from a year earlier, a sharp slowdown from a 14.8% annual increase in December.
Shipments to China, Japan's largest trading partner, increased 1% from a year earlier. a small fraction of the 20.1% annual increase in the previous month.
The trade balance came to a deficit of 471.4 billion yen ($5.67 billion). That compared with the median forecast for a 60.0 billion yen surplus.
Japan's economy shrank slightly in the final quarter of last year, hurt by an expiry of government incentives for car purchases and a slowdown in exports, but is widely expected to resume growing in the current quarter as exports and industrial production pick up.
The central bank and the government both upgraded their assessment of the economy this month due to signs that export growth is boosting factory output.
Moody's Investors Service warned on Tuesday, however, that it may cut Japan's sovereign rating if government policies fall short of comprehensive tax reform needed to bring ballooning public debt under control.
That added to the woes confronting unpopular Prime Minister Naoto Kan, who is struggling to push bills needed to enact a $1 trillion budget for the year from April 1 through a split parliament, while he grapples with a growing rift in the ruling Democratic Party of Japan. - Reuters
Economists said the slowdown was likely to be temporary as underlying demand overseas was still strong and companies are likely to increase inventories.
Still, the data could be uncomfortable for the government and the Bank of Japan as turmoil in Libya and a recent spike in commodity prices cloud the outlook for export-reliant Japan.
Improvements in exports and industrial output prompted the government and the Bank of Japan to raise their economic assessments this month. But sluggish domestic demand and persistent deflation mean that the BOJ will stick to its ultra-easy monetary policy for the time being.
"China has started to tighten policy to slow its economy and this shows in January. China stopped tax breaks on cars in December, which also had an impact," said Takahide Kiuchi, chief economist at Nomura Securities.
"The slowdown in Japan's export growth in January is temporary and exports could continue as final demand overseas is still strong and the inventory cycle suggests there is more demand."
SHIPMENTS TO CHINA
The 1.4% annual rise in exports in January was much slower than the median forecast for a 7.4% annual increase and follows a 12.9% rise in the year to December.
Exports to Asia, which account for more than half of Japan's total exports, rose 0.4% from a year earlier, a sharp slowdown from a 14.8% annual increase in December.
Shipments to China, Japan's largest trading partner, increased 1% from a year earlier. a small fraction of the 20.1% annual increase in the previous month.
The trade balance came to a deficit of 471.4 billion yen ($5.67 billion). That compared with the median forecast for a 60.0 billion yen surplus.
Japan's economy shrank slightly in the final quarter of last year, hurt by an expiry of government incentives for car purchases and a slowdown in exports, but is widely expected to resume growing in the current quarter as exports and industrial production pick up.
The central bank and the government both upgraded their assessment of the economy this month due to signs that export growth is boosting factory output.
Moody's Investors Service warned on Tuesday, however, that it may cut Japan's sovereign rating if government policies fall short of comprehensive tax reform needed to bring ballooning public debt under control.
That added to the woes confronting unpopular Prime Minister Naoto Kan, who is struggling to push bills needed to enact a $1 trillion budget for the year from April 1 through a split parliament, while he grapples with a growing rift in the ruling Democratic Party of Japan. - Reuters
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