Japan’s exports grew more than expected in January, providing much-needed support for the economy and keeping the door open for the Bank of Japan as it inches toward ending its negative rate policy.
Exports rose 11.9% in January from a year earlier, beating economists’ forecast of a 9.5% gain, the finance ministry reported Wednesday. Imports declined for a 10th month, falling 9.6%, spurred by slides in coal and liquefied natural gas. That compared with the consensus for an 8.7% decline.
The gain in exports, coming a month after a revised 9.7% rise in December, is a positive sign for Japan after the economy unexpectedly fell into recession in the last quarter of 2023 due to stagnant domestic spending.
The evidence that external demand is relatively steady will likely underpin market views that the BOJ can continue to move toward normalizing monetary policy, as many economists expect to happen by April. The central bank’s policy board has recently sought to assure markets that the first rate hike since 2007 won’t result in radical changes, as policy settings will remain accommodative.
“Demand for electronic products and chip-making gears is recovering, and a drop in imports means inflation is stabilizing and helping consumer sentiment,” said Harumi Taguchi, principal economist at S&P Global Market Intelligence. “I think the BOJ can maintain a stance of looking to raise interest rates in April if it can confirm strength in wages.”
Governor Kazuo Ueda reiterated his view last week that the bank will keep parsing data carefully to judge whether a gradual economic recovery will continue.
What Bloomberg Economics Says...
“Brisk shipments of cars and semiconductor-related products continue to buoy exports — an offset to weak domestic demand. This suggests external demand could temper what looks set to be a third straight quarter of contraction in GDP in the first three months of 2024.”
— Taro Kimura, economist
Wednesday’s figures were generally solid versus a year earlier. Exports to the US rose 15.6%, driven by cars and medical devices in the 28th straight month of increases. Those to the EU gained 13.8%, and exports to China rose by 29.2%, as the number of working days in 2024 increased compared with a year earlier due to the timing of the lunar new year.
Shipments of cars and car parts along with equipment for chip-making were the main engines of growth in January.
Still, the gains “are likely to be only temporary,” according to Kota Suzuki, an economist at Daiwa Securities. “Usually in January, a last-minute surge in demand before the Chinese New Year vacation boosts exports.”
Wednesday’s data also showed that seasonally adjusted exports fell 3.6% compared with December, an indication that the underlying trend may be more fragile than the headline figure suggests.
Looking ahead, external demand may waver as some of Japan’s key trading partners are expected to see growth decelerate in 2024. In its latest quarterly outlook published last month, the BOJ said the economy “is expected to be under downward pressure stemming from a slowdown in the pace of recovery in overseas economies.” Growth in the US is forecast to slow to 1.6% this year.
“If you look at the world economy as a whole, it’s slowing down, so it’s not like exports will be that much of a driver of economic growth,” said Takeshi Minami, chief economist at Norinchukin Research.
