Japanese exports have taken a tumble, falling by their fastest pace since the aftermath of last year’s Earthquake and tsunami.
The decline is being blamed on the territorial dispute with China with exports to the world’s second largest economy tumbling due to protests against Japanese companies. Shipments to China fell by 14.1% in September compared to the previous year.
Diplomatic clashes between the two Asian powers saw widespread rioting across China, forcing many Japanese factories to close over fears for the safety of their workers. Chinese political activists have also called for the boycott of Japanese goods until the dispute over the ownership of a group of islands is resolved.
The weak data is piling on the pressure for the Bank of Japan to stimulate the economy; it is planning to cut its economic forecasts and is pondering the use of further monetary easing at its October 30 meeting.
“The worsening of exports reflected both the global slowdown and anti-Japan protests in China. Exports will likely fall even further and the trade deficit will grow in October as the impact from the boycotting of Japanese products will play out more clearly in October,” said Naoki Iizuka, an economist at Citigroup Global Markets Japan in Tokyo.
“The slowdown in exports to China will likely hit sectors such as automobiles, electronics and general machinery harder in the coming months, and that could further dampen Japanese firms’ capital spending,” added Iizuka, noting that the BOJ was likely to ease policy further next week and cut its estimate of export performance.
As expected the worst affected industries were electronics, cars and general machinery. Fears are mounting that the Japanese economy is heading for a recession after the poor trade data comes after warnings over the strength of the Japanese economy. The governor of the Bank of Japan has warned that his country is at the mercy of at risk from the shocks from the Euro crisis.
Slowing demand in key markets, as well as a strong yen, has weighed on manufacturing and exports.
As of 10:15am
The Pound to Euro exchange rate is currently trading at 1.2296
The Pound to US Dollar exchange rate is currently trading at 1.6047
The Pound to Japanese Yen exchange rate is currently trading at 127.5670
The Euro to US Dollar exchange rate is currently trading at 1.3053
The Euro to Pound exchange rate is currently trading at 0.8131
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