TOKYO: Japan’s exports fell for the first time in eight months in May, data showed on Wednesday, indicating that sweeping U.S. tariffs were threatening the country’s fragile economic recovery.
Japanese Prime Minister Shigeru Ishiba and U.S. President Donald Trump have yet to reach a trade deal.
Tokyo is scrambling to find ways to get Washington to exempt its automakers from 25% automobile industry-specific tariffs, which are dealing a heavy blow to the country’s manufacturing sector. It also faces a 24% ‘reciprocal’ tariff rate starting in July 9 unless it can negotiate a deal with Washington.
Total exports by value dropped 1.7% year-on-year in May, data showed, smaller than a median market forecast for a 3.8% decrease and following a 2% rise in April.
Exports to the United States plunged 11.1% last month from a year earlier, while those to China were down 8.8%, the data showed.
The tariff threat had driven companies in Japan and other major Asian exporters to ramp up shipments earlier this year, inflating levels of U.S.-bound exports during that period.
The data showed imports dropped 7.7% in May from a year earlier, compared with market forecasts for a 6.7% decrease.
As a result, Japan ran a trade deficit of 637.6 billion yen ($4.39 billion) last month, compared with the forecast of a deficit of 892.9 billion yen.
The hit from U.S. tariffs could derail Japan’s lacklustre economic recovery. Subdued private consumption already caused the world’s fourth-largest economy to shrink in January-March, the first contraction in a year.
They also complicate the Bank of Japan’s task of raising still-low interest rates and reducing a balance sheet that has ballooned to roughly the size of Japan’s economy.
The BOJ kept interest rates steady on Tuesday and decided to decelerate the pace of its balance sheet drawdown next year, signalling its preference to move cautiously in removing remnants of its massive, decade-long stimulus.
According to an estimate by the Japan Research Institute, if all the threatened tariff measures against Japan were to take effect, U.S.-bound exports will fall by 20-30%.
Some economists say those duties could shave around 1 percentage points of the nation’s gross domestic product.
Japan exported 21 trillion yen worth of goods to the United States last year, with automobiles representing roughly 28% of the total.
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($1 = 145.3400 yen)
