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Japan's Exports Jump 10% In December, Auto Demand High, Trade With China Rises

Discover how Japan's exports jump 10% in December, signaling a robust growth in its trade sector, driven by increased demand for vehicles and a revival in trade with China.

Daisy-Mae Schmitt
Jan 25, 202411 Shares11312 Views
Japan's exports jump 10% in December, marking a notable improvement in the country's trade dynamics. This surge was primarily driven by increased demand for Japanese vehicles, machinery, and computer chips, coupled with a revival in trade with China.

Export Growth And Economic Implications

In December, Japan's exports rose nearly 10% compared to the previous year, according to preliminary customs data. This increase is a stark contrast to the 0.2% contraction seen in November. Gabriel Ng of Capital Economics highlighted the impact of this surge, stating, "The improvement late in the year means that overall net exports should have made a significant contribution to GDP growth in the fourth quarter." However, he cautioned about the future, adding, "Looking ahead, we expect export growth will be sluggish this year."
The depreciation of the Japanese yen played a pivotal role in boosting export manufacturers like Toyota, Honda, and Sony. Although this trend has raised the cost of importing commodities, such as oil and gas, vital for fueling Japan's economy, a decline in oil prices in December eased some of these burdens. The trade data revealed a surprising surplus of 62 billion yen ($410 million), with imports falling by nearly 7%.

Trade Dynamics With China And The US

Japan's trade relationship with China showed signs of recovery, with China-bound shipments rising for the first time in 13 months. Exports to China, Japan's biggest trading partner, climbed 9.6% to 1.77 trillion yen ($12 billion) in December. "Shipments of semiconductor manufacturing equipment and cars led the expansion," reported the finance ministry. However, there was a noticeable 22% decline in exports of chip and other electronic components.
The United States, Japan's single largest export market, also saw a significant increase in imports from Japan. Exports to the U.S. jumped 20% in December from the year before. "Shipments of cars rose 16% in unit terms, to 1.47 million vehicles, and more than 35% in dollar value," the data showed, underlining the robustness of the automotive sector.
Takeshi Minami, chief economist at Norinchukin Research Institute, expressed caution despite the positive figures. "Exports were strong but it might only be a bounceback after the fall in November. The pace of economic growth in the U.S. and Europe seems to be slowing a bit and China has only just bottomed out so any recovery in exports is likely to be a weak one," he said.

A Look At The Bigger Picture

For the full year of 2023, Japan's exports grew by 3% to 100.9 trillion yen ($680 billion), while imports fell by 7% to 110.2 trillion yen ($740 billion). The trade deficit stood at 9.2 trillion yen ($62 billion), a sharp decrease from the 20.3 trillion yen deficit in 2022. This reduction in the trade deficit, while still marking three consecutive years of deficits, represents a significant improvement over the previous year.
The data also indicated a surge in tourist arrivals, which are counted as exports in trade statistics, contributing to the overall positive trend. This influx of tourists, combined with the recovery in demand in China and strong shipments to the U.S., paints a cautiously optimistic picture for Japan's export-driven economy.

Conclusion

Japan's export sector ended the year on a high note, buoyed by strong demand for its automobiles, machinery, and chips, and a revival in trade with China. While these figures offer a glimmer of hope for the world's third-largest economy, experts warn of potential headwinds and a need for cautious optimism in the face of an uncertain global economic landscape.
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