FXStreet (Barcelona) – According to Economists at Nomura, the recent drop in exports to US weighted down the Japanese real exports in May, but an expected recovery in the US will lead the Japanese exports to rebound higher in July-September period.
Key Quotes
“Based on the Bank of Japan’s export and import price data, both real exports and real imports declined, falling 4.7% m-m and 4.0% m-m, respectively. In May, real exports to the US were down 12.3% from the previous month, and we think this was a major factor behind the decline in overall exports.”
“As noted, lower exports to the US weighed heavily on real exports in May, and declines were most apparent in autos & other transport equipment, and in general machinery. In the latter category, there was a dip in exports of power station equipment, and we think exports were affected also by decreased investment in energy-related industries because of the downturn in oil prices. Also, late in 2014 and early in 2015 there was some weakness in US auto sales, and it seems that some months later the effects are becoming evident in the form of a fall in Japan’s auto exports to the US.”
“Furthermore, Japanese automakers have been ramping up exports from their bases in Mexico, with growth especially strong in shipments to the US. This cannibalization is likely to be contributing as well to a structural decline in Japanese auto exports bound for the US.”
“Average real exports for Apr–May were down 3.7% from the Jan–Mar average, which in contrast had been 1.4% higher than the average for Sep–Dec 2014. We had expected Japanese exports to lose momentum in Apr–Jun because of Jan–Mar weakness in the US economy, attributable in turn to industrial action at ports on the US West Coast and a cold snap that hit consumer spending, but it now seems likely the slowdown will be greater than we anticipated.”
“That said, economic indicators in the US are showing promise; for example, the ISM manufacturing index is starting to pick up. In addition, Japanese automakers appear poised to increase exports on a worldwide basis. We maintain our view that exports from Japan will rebound in Jul–Sep, in tandem with recovery in the US economy.”
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