Japan exports fall for first time since 2016 as trade war fears mount

US President Donald Trump has made clear he is unhappy with Japan’s $69 billion trade surplus, mostly auto exports, with the US and wants a two-way agreement to address it. (Reuters)
Updated 18 October 2018

Japan exports fall for first time since 2016 as trade war fears mount

  • Japanese policymakers remain wary about the overall economic impact of the international trade frictions
  • The US-Sino tariff row has yet to materially hurt trade activity

TOKYO: Japan’s exports fell in September for the first time since 2016 as shipments to the US and China declined, likely impeding third quarter economic growth and adding to concerns about the broadening impact of an escalating Sino-US trade war.
The data comes days after a Reuters poll showed a third of Japanese companies — not just exporters — have been affected by the trade conflict between the world’s two biggest economies, and more than half worried about its fallout on their business.
Japanese policymakers also remain wary about the overall economic impact of the international trade frictions. A string of natural disasters that struck Japan has added to the strain on factories, disrupting output and physical distribution.
The US-Sino tariff row has yet to materially hurt trade activity, but a slowdown in external demand has bolstered views that Japan’s economy, the world’s third largest, likely slowed sharply in the July-September quarter.
“The economy probably grew only slightly in the third quarter, led by firm consumption and brisk capex. External demand likely made no contribution,” said Takeshi Minami, chief economist at Norinchukin Research Institute.
“Assuming the US-China trade frictions have widespread effects on global trade, Japan’s exports will struggle to grow.”
Minami said declines in shipments to the US and China — the two key export destinations for Japan — are a source of concern as each of them accounts for about 20 percent of Japanese exports, respectively.
Ministry of Finance (MOF) data out on Thursday showed Japanese exports fell 1.2 percent in September from a year earlier, against a 1.9 percent increase expected by economists in a Reuters poll, and followed a 6.6 percent gain in August.
It was the first decline since November 2016.
In volume terms, exports fell 4.8 percent in the year to September, the first drop in seven months.
Japan’s exports to the US declined 0.2 percent in the year to September, dragged down by falling shipments of construction and mining machinery, auto parts and medicines.
US-bound auto exports amounted to some 143,000 cars, down 7.0 percent year-on-year in a snapback from the previous year’s brisk shipments, a sign that car sales have levelled off.
Imports from the US rose 3.1 percent in September, led by crude oil, liquefied petroleum gas, helping reduce Japan’s trade surplus with the US by 4.0 percent year-on-year to ¥590 billion ($5.24 billion).
The US Trade Representative’s office told Congress on Tuesday it would open trade talks with Japan, describing the country as an important yet underperforming market for US exports.
Tokyo and Washington last month agreed to start trade talks in an arrangement that, for now, avoids the worst-case scenario of an imminent 25 percent tariff on cars.
Trump has made clear he is unhappy with Japan’s $69 billion trade surplus with the US — nearly two-thirds of it from auto exports — and wants a two-way agreement to address it.
Tokyo pushed back on a straight bilateral Free Trade Agreement that Washington had sought, fearing it could put Japan under pressure to open politically sensitive sectors such as agriculture.
Thursday’s trade data showed exports to China, Japan’s biggest trading partner, fell 1.7 percent in the year to September, the first decline in seven months, dragged down by semiconductor production equipment.
Shipments to Asia, which account for more than half of Japan’s overall exports, rose 0.9 percent.
Overall imports rose 7.0 percent in the year to September, versus the median estimate for a 13.7 percent annual increase.
The trade balance was surplus of ¥139.6 billion, compared with the median estimate for a shortfall of ¥50 billion.
“External demand has likely put a drag on Japan’s economy,” said Koya Miyamae, senior economist at SMBC Nikko Securities.
“Going forward, exports may recover from supply constraints, but effects from slowdown in emerging markets, and the US-China trade war remain a source of concern.”


Oman said to mull new regional airline

Updated 22 October 2019

Oman said to mull new regional airline

DUBAI: Oman is considering setting up a new regional airline that could take over domestic operations from state carrier Oman Air, two sources familiar with the matter told Reuters.

A request for proposal was issued this month by state entity Oman Aviation Group for a feasibility study into operating the new airline, “Oman Link,” the sources said.

Setting up a new airline for domestic flights would allow Oman Air to focus on its international network where it competes with large Gulf carriers Emirates, Qatar Airways, and Etihad Airways.

The new airline could partner with Oman Air with both carriers connecting passengers to each other but would have its own independent management, the sources said on the condition of anonymity because the details are private.

Proposals are to be submitted by Nov. 11, one of the sources said.

The new airline would use regional jets for domestic flights and potentially later to other cities in the region where there is not enough demand to fill the larger single aisle jets used by other airlines in Oman.

FASTFACT

Oman Air operates flights to four airports in the country, including the main Muscat International.

Oman Aviation Group and its unit Oman Air did not respond to separate emailed requests for comment.

Oman Air operates flights to four airports in the country, including the main Muscat International, according to its website.

The airline uses 166-seat Boeing 737 jets and 71-seat Embraer E175 aircraft on domestic and regional flights.

Both aircraft types are too costly to consistently operate domestic routes at a profit, according to industry sources.

Oman has been restructuring its aviation sector in recent years. Oman Aviation Group was formed in 2018 and includes Oman Air, Oman Airports and Oman Aviation Services.

A budget, second airline, Salam Air, was launched in 2017. It is owned by Omani government pension funds and the Muscat municipality.

Last week, Eithad and Air Arabia said they were jointly setting up a low cost carrier in Abu Dhabi.