Weak Yen Boosts Japan's Exports Ahead of BOJ Meeting

Image Credit: Reuters

Japan’s exports continued to rise in November, aided by a weaker yen, though the overall trade outlook remained sluggish ahead of the Bank of Japan’s upcoming meeting. 

According to the Ministry of Finance, export values increased by 3.8% compared to the previous year, driven by shipments of chip-making equipment and non-ferrous metals, while auto exports weighed on performance.

The result exceeded analysts’ expectations of a 2.5% gain. Imports, meanwhile, declined by 3.8%, largely due to lower crude oil prices, but the trade deficit persisted at ¥117.6 billion.

Despite the rise in export value, trade’s contribution to the Japanese economy remains limited. Demand from the US and Europe continued to weaken, even as exports to China increased by 4.1%, supported by the country’s aggressive stimulus measures. Export volumes, however, showed minimal change, highlighting subdued global demand.

The report revealed an 8% drop in shipments to the US, driven by declines in cars and pharmaceuticals, while exports to Europe fell 12.5%, also led by autos. In contrast, China’s growing demand provided a small boost. 

“Auto exports, a major sector for Japan, are dragging down overall trade growth,” noted Takeshi Minami, an economist at the Norinchukin Research Institute. “With the global economy neither accelerating nor stalling, it’s challenging for exports to gain significant momentum.”

November marked the fifth consecutive month of a negative trade balance, suggesting continued pressure on Japan’s economy in the fourth quarter. Trade was also a net drag on growth in the third quarter. 

The yen averaged 152.83 per dollar in November, 1.7% weaker than a year ago, which benefited exporters by boosting the value of overseas earnings when converted to yen. 

The Bank of Japan previously indicated that while imported inflation is likely to ease, underlying inflation could rise gradually due to stronger connections between wages and prices. The central bank’s latest policy decision is expected on Thursday.

Looking ahead, Japan faces uncertainty in global trade as Donald Trump prepares to return to the White House in January. The US President-elect has vowed to impose additional tariffs on China, Mexico, and Canada and has even floated the idea of universal tariffs on all imports, including those from Japan. 

Earlier this month, Japan’s Foreign Minister Takeshi Iwaya stated that Tokyo intends to resume trade talks with the incoming administration, prioritizing discussions on eliminating tariffs on cars and auto parts.

 

 

 

 

 

 

 

Paraphrasing text from "Reuters" all rights reserved by the original author.