• Bloomberg, Kyodo

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Japan’s exports fell by the smallest margin in seven months in September in another sign that the pandemic’s hit on global trade is easing.

The value of Japan’s overseas shipments declined 4.9% from a year earlier in September, narrowing from a 14.8% drop in August, the Finance Ministry said Monday. The improved figure, supported by the biggest gain in exports to China in more than two and a half years, offered an indication that the low point for trade has passed.

Chip-making equipment powered the increase in exports to China, while a jump in car shipments to the U.S. fueled the first gain in exports there in over a year. Still, economists had projected a smaller overall export decline of 2.4%.

“China is the biggest driving factor for Japan’s exports at this moment as the economy there makes a quick recovery. But I don’t think China can continue picking up at this pace given what’s happening in the rest of the world as the pandemic continues to weigh on activity,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

Meanwhile, the ministry’s data showed Japan’s exports in the first half of fiscal 2020 fell 19.2% from a year earlier, posting the largest year-on-year drop in more than 10 years, as the coronavirus pandemic battered overseas demand for cars and other goods.

During the six months through September, exports plummeted to ¥30.91 trillion, logging the sharpest decrease since a 36.4% plunge in the first half of fiscal 2009 in the wake of the global financial crisis.

The goods trade balance logged a ¥1.11 trillion deficit, the fourth successive half-year period of red ink, swelling 30.6% from a year earlier. Imports sank 18.1% to ¥32.03 trillion, the steepest fall since the 19.0% drop in the first half of fiscal 2016.

New Prime Minister Yoshihide Suga faces the challenge of trying to revive the economy after it shrank by a record in the second quarter. His success will greatly depend on exports, a key driver of Japanese growth.

Third-quarter growth is unlikely to make up for the depths of declines in the second quarter, an outcome that could put pressure on Suga to compile another stimulus package. Some 85% of economists surveyed by Bloomberg expect a third extra budget before year-end.

The economy’s reliance on global trade makes it vulnerable, especially with the virus resurgence in some key trade partners such as Europe and the U.S. “The pandemic is going to keep Japanese companies cautious about hiring, wage growth and business investment,” Minami said.

Exports to China rose 14%, with chipmaking equipment surging 47%.

Overall shipments to the U.S. eked out a 0.7% gain from a year earlier, for the first increase in 14 months, helped by a 22% jump in car exports.

The value of shipments to the EU continued to drop, falling 10.6%, though the decline was the smallest since February.

Overall Imports dropped 17.2%. Analysts had forecast a 21.4% decline.

The trade balance was a ¥675 billion surplus. The projection was for a ¥980.7 billion surplus.

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