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Japan’s Exports Fall for Fifth Month Amid Trade Tensions

Toru Fujioka and Shiho Takezawa
Japan’s Exports Fall for Fifth Month Amid Trade Tensions

(Bloomberg) -- Japanese exports fell for a fifth straight month in April as the effects of the U.S. trade war with China and a slowdown in the global tech cycle continued to weigh on Japan’s economy.

The value of shipments abroad declined 2.4% in April from a year earlier, according to the finance ministry, matching the previous month’s drop. Economists had forecast a 1.6% fall. Ahead of President Donald Trump’s visit to Tokyo, during which trade issues are likely to be discussed, the data showed Japan’s monthly trade surplus with the U.S. rose 18% from a year earlier.

On a more positive note for the economy, machinery orders, a leading indicator of capital spending in coming months, rose for a second month in March, gaining 3.8% from April.

Key Insights

Pointing to both the impact of the U.S. trade war with China and softer global demand for tech-related items, the data showed exports to China falling 6.3%, with a 41% slide in equipment for making semiconductors the biggest drag on overall shipments.While economists said a slight slowing in the pace of shipment declines to the world’s second-largest economy suggested the trend wasn’t worsening in April, the breakdown in U.S.-China trade talks in May bodes ill for the outlook.Japan’s economic data is currently under close scrutiny by the government amid speculation that a tax hike scheduled for October might be postponed due to concerns over the strength of the economy.A 9.6% gain in exports to the U.S. is an indication of the ongoing strength of demand in the world’s largest economy, though the rising U.S. trade deficit could serve Trump’s interests as he meets Prime Minister Shinzo Abe this weekend. Any mention by the two leaders of agriculture, currencies or car tariffs is likely to generate high interest.

What Bloomberg’s Economist Says

“The trade data for April showed exports were under pressure, and concerns about the deterioration in trade relations between the world’s two biggest economies is likely to keep Japanese business spending in check.”

Yuki Masujima, economist Click here to read more

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Imports rose 6.4% in April, offering a stronger sign of domestic demand after a sharp drop in quarterly import figures seen in GDP figures earlier this week. Still, that suggests imports could weigh on overall growth in the second quarter.The trade balance was a surplus of 60.4 billion yen in April, versus a median forecast for a 232.7 billion yen surplus. The figure was the smallest April surplus in four years. While economists remain concerned that the gloomy export outlook may weigh on companies’ investment plans, the monthly gain in machinery orders offers hope that capital spending will show resilience over the coming months.

--With assistance from Yuko Takeo and Tomoko Sato.

To contact the reporters on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net;Shiho Takezawa in Tokyo at stakezawa2@bloomberg.net

To contact the editors responsible for this story: Malcolm Scott at mscott23@bloomberg.net, Paul Jackson, Henry Hoenig

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