Japan's exports log biggest drop in 4 years as US tariff impacts intensify
Total exports from the world's fourth-largest economy dropped 2.6% year-on-year in July in value terms, the biggest monthly drop since February 2021, when exports fell 4.5%.
It was larger than a median market forecast for a 2.1% decrease and marks a third straight month of decline after a 0.5% drop in June.
Despite the plunge in the value of exports, shipment volumes have so far held up as Japanese exporters have avoided major price hikes, said Takeshi Minami, chief economist at Norinchukin Research Institute.
"But they would eventually have to pass on costs to U.S. consumers and that would further hamper sales in the coming months," he said.
Exports to the United States in July fell 10.1% from a year earlier, with automobiles slumping 28.4% and automotive components down 17.4%.
However, automobile exports fell just 3.2% in volume terms, suggesting Japanese automakers' price cuts and efforts to absorb additional tariffs have partly shielded shipments.
The United States imposed 25% tariffs on automobiles and auto parts in April and threatened 25% levies on most of Japan's other goods. It later struck a trade deal on July 23 that lowered tariffs to 15% in exchange for a U.S.-bound $550 billion Japanese investment package.
The agreed tariff rate on automobiles, Japan's largest export sector, is still far higher than the original 2.5%, exerting pressure on major automakers and parts suppliers.
Exports to other regions were also weak. Those to China were down 3.5%, the data showed.
Total imports in July dropped 7.5% from a year earlier, compared with market forecasts for a 10.4% fall.
As a result, Japan ran a deficit of 117.5 billion yen ($795.4 million) in July, compared with a forecast of a 196.2 billion yen surplus.
The outcome follows unexpectedly strong growth in gross domestic product (GDP) in the April-June quarter, separate data showed last week, fuelled by surprisingly resilient exports and capital expenditure.
Economists said the strong exports growth in GDP data reflected differences in how the impact of price changes is factored in.
Nevertheless, Norinchukin's Minami said that the Japanese economy has so far avoided the worst.
"As the tariff deal has at least reduced uncertainties, the Bank of Japan is likely to resume rate hikes as early as in October," he said.
($1 = 147.7200 yen)
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Finextra
an hour ago
- Finextra
How Tight Outbound Controls Can Backfire: Fueling Hawala and Weakening Inbound Remittances: By Md Rezaul Karim
Bangladesh's strict currency control regulations, designed to safeguard foreign exchange reserves and stabilize the economy, often result in unintended consequences. While these policies aim to curb money outflows, they can inadvertently disrupt legitimate outbound payments, causing delays and driving individuals and businesses to seek alternative, informal channels like hawala. This shift not only undermines the effectiveness of official financial systems but also limits the inflow of remittances, weakening the overall economy. As one of the world's top remittance-receiving nations, Bangladesh is expected to receive over USD 30 billion in remittances by 2025. These inflows are vital for the country's foreign reserves and millions of households. However, along with these inflows, there are legitimate outbound payment needs for trade, education, healthcare, travel, and digital services. When the formal system obstructs these flows, money often shifts to hawala, which directly counters the remittances coming through banks. Public information on outbound remittance data is limited. However, market insights suggest that approximately USD 5–7 billion in outbound remittances (excluding trade payments) leave Bangladesh each year. In 2023, however, Bangladesh Bank reported only USD 211 million of these transfers flowing through formal banking channels, indicating that nearly 96% of outbound remittances were processed through informal networks like hundi/hawala. If left unaddressed, this disparity will continue to erode the formal economy. Outbound Flow Estimates & Channels: Banking Channel 211 Million 4% Informal Channels USD 5 to 7 Billion 96% This article explores the impact of strict outbound flow restrictions on inbound remittances, focusing on Bangladesh's case. It examines how easing these restrictions, streamlining payment processes, and adopting digital solutions could foster economic growth, strengthen financial systems, and attract greater global investment. By shifting toward a more balanced approach, Bangladesh can leverage its remittance potential more effectively while facilitating smoother cross-border payments for businesses and individuals alike. Why Outbound Payments Matter Individuals and small businesses in Bangladesh have legitimate reasons to send money abroad, including: Small Trade and Business Payments: SMEs and individual traders often import goods directly from suppliers in markets like China, Malaysia, and Indonesia. In FY 2024–25, imports reached USD 64.4 billion, with small trade payments making up an increasing share. Without efficient banking channels, many turn to informal systems to keep operations running. Digital Services and Software: Local IT companies and freelancers regularly purchase software, cloud tools, online courses, and other digital services from international providers. Without smooth outbound payments, these businesses struggle to stay competitive. Tuition Payments: In 2024, around 60,000 Bangladeshi students went abroad for higher education, more than double the 26,112 recorded in 2014. With an estimated 106,000 students currently studying abroad, outbound tuition payments have reached about USD 2 billion. Healthcare: According to the Daily Star (Dec 2024), approximately 350,000 Bangladeshis travel abroad annually for medical treatment, primarily to India, Thailand, and Singapore. These healthcare-related outbound flows amount to roughly USD 3 billion each year. Travel (Including Hajj & Umrah): Each year, 2 million Bangladeshis travel abroad for tourism, spending more than USD 1 billion. Additionally, 100,000 travel for Umrah and 90,000 for Hajj. Religious travel alone contributes USD 600 million in outbound payments. Remittance from Expatriates in Bangladesh: With approximately 150,000 expatriates working in Bangladesh, outbound salary and savings transfers amount to about USD 1 billion annually. Although these categories are recognized by Bangladesh Bank, inefficiencies, excessive paperwork, and limitations imposed by legacy correspondent banking arrangements often make formal channels unattractive. Consequently, businesses frequently turn to informal networks such as hawala. Why Efficient Outbound Payments Are Crucial Easing legitimate outbound transfers would yield several benefits: For SMEs and Traders : A small textile factory importing fabric from China could make payments smoothly through banking channels, avoiding hawala. This transparency builds trust with suppliers and ensures compliance. Without efficient official channels, businesses often resort to informal networks for quicker transactions. : A small textile factory importing fabric from China could make payments smoothly through banking channels, avoiding hawala. This transparency builds trust with suppliers and ensures compliance. Without efficient official channels, businesses often resort to informal networks for quicker transactions. For Freelancers and IT Firms : Instant payments for software or cloud services enhance productivity, competitiveness, and revenue generation. Without efficient payment systems, freelancers often rely on third parties with international accounts, further fueling the informal market. : Instant payments for software or cloud services enhance productivity, competitiveness, and revenue generation. Without efficient payment systems, freelancers often rely on third parties with international accounts, further fueling the informal market. For Individuals: Students, patients, and travelers could make payments without facing delays or overpaying in the open market. For instance, parents may need to urgently send tuition or living expenses to universities abroad, and patients may need to pay for medical treatments. Ultimately, every outbound transaction conducted through official channels is one less for hawala networks, making it harder for them to operate. How Tight Outbound Controls Can Unintentionally Boost Hawala and Affect Inbound Remittances Regulators often impose strict controls on outbound payments to preserve foreign currency reserves, which are crucial for paying for urgent imports like fuel, food, and medicine. While this strategy may seem logical in the short term, it creates a chain effect that harms the economy over time. Think of Bangladesh's cross-border financial flows as two interconnected buckets—one for Taka inside Bangladesh and one for foreign currency outside. When outbound payments through legal banking channels are restricted: Outbound Demand Shifts to Hawala Networks: The unmet demand for outbound payments doesn't disappear; it simply shifts to informal channels like hawala. Students, businesses, and families still need to send money abroad. When banking channels are slow or limited, they turn to hawala. Foreign Exchange Market Distortion: Hawala creates artificial demand for foreign currency in the open market while increasing demand for Taka abroad. This creates pressure on both the local currency and the foreign exchange market. Inbound Remittances Get "Netted Off": Hawala operators balance their books by matching outbound and inbound transfers, leading to a "net-off" effect. As a result, some inbound remittances that should flow through formal channels are instead settled off the books. Banking System Loses Credibility and Reserves Stay Weak: Even if foreign reserves seem protected in the short term, reduced formal inflows mean the country ultimately loses more than it saves. The Bottom Line: Strict outbound controls can reduce formal inbound remittances because hawala "nets off" the two-way flow of money. What Easing Outbound Payments Could Look Like Create a Simple 'Personal Outward Remittance' System: Allow residents to send a modest annual amount (for education, medical expenses, small family support, subscriptions) fully digitally, using e-KYC, e-documents, and internal banking portals. Simplify Documentation: Bangladesh Bank already lists permissible categories. A one-page checklist per use case (e.g., tuition fees, hospital deposits) could streamline the process, accepting digital invoices and allowing post-verification for smaller amounts to ensure urgent payments aren't delayed. Transparent Pricing: Require banks to disclose fees and exchange rate margins upfront, aligning with G20 targets for fair and affordable remittances. Expand Beyond SWIFT: Allow banks to connect with regulated global fintech networks such as Euronet's 'Dandelion Payments', enabling faster settlement times, lower transaction costs, and greater transparency and compliance. SWIFT is crucial for big, complex payments, but retail-size transfers often move faster and cheaper through purpose-built networks that connect to bank accounts, cards and wallets with end-to-end tracking. By diversifying beyond SWIFT, Bangladesh can modernize its payment infrastructure and keep pace with global trade. Join Regional Cross-Border Payment Networks: Many countries, under government-to-government collaborations, have integrated their national payment systems. For instance, countries like Singapore, Malaysia, Thailand, India, and Indonesia have developed 'Nexus,' a centralized payment system to enhance efficiency in cross border payments outside of SWIFT system. Bangladesh could explore similar initiatives for improved cross-border payments in prefered corridors. Lessons from Other Countries Countries with similar foreign exchange policies have already benefited from easing outbound flows: India : The Liberalized Remittance Scheme (LRS) allows Indians to send up to USD 250,000 annually for education, travel, business, or investments, reducing the pressure on informal channels. : The Liberalized Remittance Scheme (LRS) allows Indians to send up to USD 250,000 annually for education, travel, business, or investments, reducing the pressure on informal channels. Thailand: Thailand has gradually liberalized outbound remittances for both individuals and corporates, making payments cheaper and faster, which supports SMEs and exporters. What Success Would Look Like When governments ease and digitize legitimate outbound payments, three positive outcomes occur at once: People return to formal banking : It becomes easier and safer than using hawala. : It becomes easier and safer than using hawala. More inbound remittances through banks : Less 'netting off' as hawala loses its outward leg. It becomes harder for it to source dollars/taka and to match cross-flows : Less 'netting off' as hawala loses its outward leg. It becomes harder for it to source dollars/taka and to match cross-flows Lower open-market pressure: As legal outbound payments rise, demand in the open market decreases. Better data for policy-making: Clean data allows Bangladesh Bank to fine-tune foreign exchange liquidity, incentives, and compliance. Besides, Regulators see the flows, which improves risk control and macro planning. Lower costs over time: Competition between banks and fintech companies drives fees closer to the G20 target (≤3%). Global bodies push in the same direction—because cheaper, faster, clearer payments shift people toward formal rails. The Bigger Picture Inbound Remittance and Reserve Growth: Bangladesh currently receives around USD 30 billion in annual remittances. With an open and trusted system, this could grow by 50%, reaching USD 45 billion by 2025. Growing Bangladesh's Cross-Border Payment Industry: Strengthening outbound payment channels fosters innovation, reduces costs, and enhances customer experience. This positions Bangladesh as a competitive player in the region and attracts global fintech investment, boosting public-private sector collaborations. Moreover, growing both inbound and outbound cross border payment industry in Bangladesh will allow local and international fintech to partner with banks for seamless payment solutions. This development will enhance regional financial integration, boost remittances, and stimulate economic growth, positioning Bangladesh as a significant partner in regional and global payment industry. Conclusion: A Smart Liberalization Strategy People don't choose hawala because they prefer informality; they turn to it when the formal system is difficult, slow, or expensive. If Bangladesh can make the Banking path easier, faster, and more affordable, individuals and businesses will naturally prefer to use banks. This means creating clear regulations, simplifying digital paperwork, integrating modern payment networks alongside SWIFT, and ensuring transparent pricing. By doing so, Bangladesh can boost formal financial transactions, allowing money to flow through banks even as people legally send payments abroad. Rather than seeing outbound payments as a "drain" on reserves, Bangladesh should recognize them as part of a two-way financial flow. By simplifying and digitizing legal outbound transfers, the country can: Reduce reliance on hawala networks, Increase inbound remittances through official banking channels, Strengthen reserves sustainably, Empower SMEs, freelancers, and individuals to expand globally, Stimulate growth in the cross-border payments industry. This approach will create a healthier, more transparent financial system that supports long-term economic growth and stability.
Telegraph
2 hours ago
- Telegraph
If Reeves isn't stopped, every inch of Britain will be the property of the state
The pitch rolling has started. The propagandists have been unleashed. We are being softened-up for the ultimate betrayal, the most obscene of broken promises, the grossest attack on private wealth in living memory. If you are a homeowner, I have grim news: Rachel Reeves has just declared war on you. You could pay even more tax, so much so that in some cases you may be forced to sell your house to pay the bill – and then to hand over yet more cash just to be allowed to say goodbye to your beloved family home. Reeves is considering several options, all abhorrent: an annual proportional wealth tax on the value of homes, large enough to replace stamp duty, council tax and more; the imposition of capital gains tax (CGT) on primary residences for the first time ever, albeit just on more expensive ones at first; an 'exit tax' as an alternative to CGT, payable on sale; and a revaluation of council tax, with even higher bands, including a mansion tax. Britain is in the midst of an epic struggle between tax-eaters and net taxpayers, between those seeking to squeeze ever more out of the private sector to keep our bankrupt welfare state going a little longer, and those desperately seeking to preserve their wealth at a time of weak GDP, stagnant real wages and rocketing costs. We have almost reached the economy's maximal taxable capacity, at least with the tools at HMRC's disposal. The bond vigilantes are circling, and Reeves has taken the UK to the brink of fiscal meltdown. Her party won't allow her to cut spending, so she is turning to the last untapped El Dorado, the final pot of cash ripe for raiding: our homes, worth trillions of pounds in total. If she goes down, she wants it to be in a blaze of Left-wing glory, taking out the forces of conservatism's last bastion and scoring the greatest victory for socialism since the glory days of Hugh Dalton and Sir Stafford Cripps. Primary residences have long been the great tax taboo, the last line of defence against predatory politicians: no government has been able to directly tax their gains in value or to impose an annual levy (a property wealth tax) over and above council tax. Slapping CGT on primary residences or an annual property wealth tax based on the value of one's home isn't some minor technocratic tweak to the tax system to make it slightly more 'efficient' or 'fair': it's an attempt at dynamiting the foundations of our society, to drastically curtail the power of the petite bourgeoisie, and to enshrine the political class's supremacy. Unlike with ISAs or pensions, whose tax-beneficial status are understood to survive at the Chancellor's discretion, primary residences are an Englishman's tax-free castles, for which we assume we have a natural right not to be taxed. This is one of the last in-built libertarian assumptions in British society, and the reason why Reeves's proposed tax 'reforms' are so pernicious. Tim Leunig, who advised Rishi Sunak and whose Left-wing ideas are also proving attractive to Reeves, is advocating for a 0.44 per cent levy on homes worth up to £500,000 to replace council tax. He simultaneously wants stamp duty to be replaced by a 0.54 per cent annual tax on homes above £500,000, with an extra 0.28 per cent supplement on values over £1m. These would be revenue-neutral, which wouldn't be good enough for Reeves: she wants to raise billions more. The rates would need to be even higher. I loathe council tax and stamp duty, but this idiot savant scheme would create Britain's first annual wealth tax, levied on a stock of illiquid assets, and would prove even worse. Property rights would be abrogated, and homeowners downgraded into leaseholders, paying the state-cum-landlord a fee for the right to keep living in our homes. The ancient tradition of the yeoman freeholder would be extinguished. Many homeowners would end up paying £7,000, £15,000 or more a year. At best, there would be no money left for holidays or school fees; at worst, total tax bills would exceed 100 per cent of annual incomes. Pensioners and the cash-poor would be forced to sell. Many would pray their house didn't increase in value, and halt repairs and enhancements. Some would tear down garages or annexes to reduce their annual tax, or allow homes and gardens to fall into disrepair to influence assessors. Entrepreneurs, rich investors and the last non-doms would flee the UK. We should scrap stamp duty, but by cutting spending, not by introducing this repulsive new form of larceny. Imposing CGT on primary residences would be almost as toxic. Like every new tax, invariably pitched to us as limited in scale and scope, it would soon be extended, in this case to ever more homes. The rates would soon be equalised to that on income. Eventually, it would become impossible to make any gains from property at all. Tax used to be only payable on real capital gains, not on inflationary increases. Labour largely ended that key protection; the Tories scrapped the last safeguards. Inflation, now at 3.8 per cent, is once again a silent thief, delivering what Milton Friedman described as 'taxation without legislation' on a grand scale. Under Reeves's plans, homeowners would pay tax on phantom inflationary gains and in many cases lose money in real terms. This would be especially true in London, where real, as opposed to nominal, property prices are often lower than they were a few years ago. It would be barely concealed theft. Buying a house would become a high-risk gamble. Homeowners who haven't kept every receipt would face tax bills for their recently completed new kitchens. More generally, there would be far fewer future home improvements and extensions as the post-tax payback would be lower. Nobody who didn't have to sell their home would do so, especially with the prospect of a Reform government reversing the raid. The housing market would implode. This war on homeowners is a bridge too far, a leap into proto-Marxist hell. Reeves is seeking to pauperise the middle classes. Taxpayers must make their fury known, write to their MPs and take to social media. This is the final battle, the fight to end all political fights: the Chancellor must be persuaded to change her mind, or else there will be no hope left for this country.
Reuters
2 hours ago
- Reuters
Mexico's inflation seen picking up in first half of August
MEXICO CITY, Aug 20 (Reuters) - Mexico's headline inflation likely rebounded in the first half of August underpinning prospects that the central bank would cut its key interest rate again, even though the rate remained within the official target, a Reuters poll showed on Wednesday. The median forecast from 14 participants saw the annual headline inflation rate reaching 3.66%, up from 3.48% in the second half of July (MXCPHI=ECI), opens new tab. The central bank targets inflation of 3% plus or minus one percentage point. The core inflation rate, which strips out highly volatile items and is considered a better measure of the price trajectory, was however estimated to have sped up to 4.27% annually, from the prior figure of 4.22%. (MXCPIC=ECI), opens new tab The Bank of Mexico slowed its pace of monetary easing earlier in August, cutting its benchmark interest rate by 25 basis points to 7.75% - its lowest level in three years. The minutes of that meeting, where one of the five governing board members voted to keep rates unchanged, are due for release on Thursday, and are expected to shed light on the bank's next moves. The market expects the key rate to end 2025 at 7.50% as Mexico's economy faces weak growth punctuated by the uncertainty surrounding U.S. President Donald Trump's trade policies. Compared with the previous two-week period, consumer prices would have according to estimates risen by 0.12%, while the core index is forecast to have increased 0.14%, according to the poll (MXCPIF=ECI), opens new tab, (MXCPIH=ECI), opens new tab. Mexico's national statistics institute is set to releaste inflation data on Friday.
