Japan exports to US fall, business mood sours amid fears of trade war

Exports to the US dipped 0.9 percent in June from the same period a year ago on waning shipments of cars and semiconductor manufacturing equipment. (Reuters)
Updated 19 July 2018
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Japan exports to US fall, business mood sours amid fears of trade war

  • Exports to the US dipped 0.9 percent in June from the same period a year ago on waning shipments of cars and semiconductor manufacturing equipment
  • The batch of data highlighted concerns among Japanese policymakers who worry Trump may resort to tariffs or other protectionist measures to fix trade imbalances with Japan

TOKYO: Japan’s exports to the US fell for the first time in 17 months and Japanese business sentiment soured amid worries about US President Donald Trump’s protectionist trade policies.
Exports to the US dipped 0.9 percent in June from the same period a year ago on waning shipments of cars and semiconductor manufacturing equipment, two of Japan’s most important export products.
Thursday’s trade data came on the heels of the Reuters Tankan, which showed business sentiment slipped in July, reflecting companies’ fears about an intensifying trade dispute between the US and China.
The batch of data highlighted concerns among Japanese policymakers who worry Trump may resort to tariffs or other protectionist measures to fix trade imbalances with Japan under his “America first” policy.
With American imports down 2.1 percent, Japan’s trade surplus with the US widened 0.5 percent year-on-year to ¥590.3 billion ($5.24 billion). That could make it a potential target for Trump’s protectionist policies.
Japan’s global exports rose 6.7 percent in June, while imports gained 2.5 percent.
“Overall exports remain healthy for now, but we are not sure how things are going to turn out on the trade policy front,” said Shuji Tonouchi, senior market economist at Mitsubishi UFJ Morgan Stanley Securities. “It’ possible talk of tariffs and trade friction could reduce corporate investment.”
The Reuters Tankan, which tracks the Bank of Japan’s closely watched quarterly tankan survey, found manufacturers’ sentiment index stood at 25 in July, down one point from June, and the service sector’s mood fell to 34 from 35 in the prior month.
The index subtracts the percentage of companies that feel negative about the economy from those who are optimistic, so a positive number means more businesses are upbeat.
Concerns about protectionism were widely cited in the Reuters poll of 483 large- and mid-sized companies, of which 268 responded between July 2-13, particularly among exporters of cars, precision machinery and metal products.
The US this month imposed 25 percent tariffs on $34 billion of Chinese goods to lower the US trade deficit, and China quickly retaliated with an increase in tariffs on US goods.
“Our clients are increasingly taking a wait-and-see stance on capital expenditure in the face of uncertainty over trade friction between the US and China and the EU,” a manager of a machinery maker wrote in the survey.
“Uncertainty is rising over capital spending plans at our client firms due to the expansion of protectionist policies and geopolitical risks,” said another machinery maker.
The manufacturers’ index is seen rising to 29 in October, while the service-sector index is expected to hold steady, after July’s decline led by real estate/construction firms.
The BOJ’s tankan showed earlier this month that big manufacturers’ mood soured for a second straight quarter in the three months to June, hurt by rising input costs and as US trade protectionism clouds the outlook for Japan’s export-dependent economy.
Still, the mood among non-manufacturers improved slightly and big firms’ solid capital spending plans offered some relief.


Davos organizer WEF warns of growing risk of cyberattacks in Gulf

Updated 16 January 2019
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Davos organizer WEF warns of growing risk of cyberattacks in Gulf

  • Critical infrastructure such as power centers and water plants at particular risk, says expert
  • Report finds that unemployment is a major concern in Bahrain, Egypt, Morocco, Oman and Tunisia

LONDON: The World Economic Forum (WEF) has warned of the growing possibility of cyberattacks in the Gulf — with Saudi Arabia, the UAE and Qatar particularly vulnerable.

Cyberattacks were ranked as the second most important risk — after an “energy shock” — in the three Gulf states, according to the WEF’s flagship Global Risks Report 2019.

The report was released ahead of the WEF’s annual forum in Davos, Switzerland, which starts on Tuesday.

In an interview with Arab News, John Drzik, president of global risk and digital at professional services firm Marsh & McLennan said: “The risk of cyberattacks on critical infrastructure such as power centers and water plants is moving up the agenda in the Middle East, and in the Gulf in particular.”

Drzik was speaking on the sidelines of a London summit where WEF unveiled the report, which was compiled in partnership with Marsh and Zurich Insurance.

“Cyberattacks are a growing concern as the regional economy becomes more sophisticated,” he said.

“Critical infrastructure means centers where disablement could affect an entire society — for instance an attack on an electric grid.”

Countries needed to “upgrade to reflect the change in the cyber risk environment,” he added.

The WEF report incorporated the results of a survey taken from about 1,000 experts and decision makers.

The top three risks for the Middle East and Africa as a whole were found to be an energy price shock, unemployment or underemployment, and terrorist attacks.

Worries about an oil price shock were said to be particularly pronounced in countries where government spending was rising, said WEF. This group includes Saudi Arabia, which the IMF estimated in May 2018 had seen its fiscal breakeven price for oil — that is, the price required to balance the national budget — rise to $88 a barrel, 26 percent above the IMF’s October 2017 estimate, and also higher than the country’s medium-term oil-price target of $70–$80.

But that disclosure needed to be balanced with the fact that risk of “fiscal crises” dropped sharply in the WEF survey rankings, from first position last year to fifth in 2018.

The report said: “Oil prices increased substantially between our 2017 and 2018 surveys, from around $50 to $75. This represents a significant fillip for the fiscal position of the region’s oil producers, with the IMF estimating that each $10 increase in oil prices should feed through to an improvement on the fiscal balance of 3 percentage points of GDP.”

At national level, this risk of “unemployment and underemployment” ranked highly in Bahrain, Egypt, Morocco, Oman and Tunisia.
“Unemployment is a pressing issue in the region, particularly for the rapidly expanding young population: Youth unemployment averages around 25 percent and is close to 50 percent in Oman,” said the report.

Other countries attaching high prominence to domestic and regional fractures in the survey were Tunisia, with “profound
social instability” ranked first, and Algeria, where respondents ranked “failure of regional and global governance” first.

Looking at the global picture, WEF warned that weakened international co-operation was damaging the collective will to confront key issues such as climate change and environmental degradation.