Exports fell 5.8 percent in August from a year earlier, declining for a third straight month on weak demand in Europe and China, resulting in a trade deficit of ¥754.1 billion, the Finance Ministry said Thursday.
The figures were better than expected: Median forecasts in Bloomberg News surveys of analysts were for a 7.5 percent drop in exports and an ¥829.3 billion trade gap. Imports, meanwhile, slid 5.4 percent.
Soaring tensions between China and Japan over the disputed Senkaku Islands in the East China Sea pose a risk to bilateral trade that has tripled in the past decade to more than $340 billion in goods ranging from rice to tractors.
The yen’s strength will likely continue to weigh on exports even after the Bank of Japan’s surprise decision Wednesday to expand monetary easing, analysts said, with the currency up about 7 percent against the dollar since mid-March.
“Exports are on a downward trend as the global economy is slowing,” said Yoshimasa Maruyama, chief economist at Itochu Corp. “The territorial dispute between Japan and China could pose a (new) risk.”
Imports fell the most since December 2009 on lower oil prices, the ministry said. The ministry reported a record ¥96 billion trade deficit with the European Union as exports to the bloc slipped 22.9 percent compared with a year earlier.
Shipments to China declined 9.9 percent, the third consecutive monthly decline, after BOJ Gov. Masaaki Shirakawa announced Wednesday that the slowdown in the world’s second-largest economy was a major topic at the bank’s latest policy meeting.
Exports to the United States rose for the 10th straight month to 10.3 percent, with increased shipments of auto parts and mining and construction machinery.
A recovery in U.S. consumer demand signals its economy is heading for a rebound, according to Maruyama, who added that “the state of the U.S. economy is better relative to Europe and other areas.”
The ninth trade deficit in 12 months highlights Japan’s increased reliance on energy imports after all of its nuclear reactors were shut down amid the Fukushima disaster.
The BOJ downgraded its economic assessment Wednesday, saying growth has “come to a pause” while overseas economies have moved “somewhat deeper into a deceleration phase.” Credit Suisse Group AG and BNP Paribas expect the economy to contract this quarter after growth slowed to a 0.7 percent annual pace in the last three months.