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Japan Times
3 days ago
- Business
- Japan Times
Japan's early May exports drop as tariff woes upend commerce
Japan's exports fell in the first 20 days of May as U.S. President Donald Trump's administration's sweeping tariffs continued to disrupt trade. Exports measured by value dropped 3% from the same period a year earlier, the Finance Ministry reported Friday. That compared with a 2.3% gain in the first 20 days of April, and a 2.0% rise for all of that month. Growth in exports has averaged 6.2% over the year through April. Japan's trade balance for the period was in the red, with a deficit of ¥1.1 trillion ($7.7 billion). The 20-day data don't provide details such as a breakdown of exports to specific countries or regions. The figures for the full month of May are set to be released on June 18. "The impact of tariffs is gradually becoming clear. I believe that a significant decline in automobile exports will occur down the road,' said Shinichiro Kobayashi, chief economist at Mitsubishi UFJ Research and Consulting. "Currently, car sales in the United States are still strong, so there is some demand for exports, but as sales decline, exports to replenish inventories will naturally decline further.' Autos, steel and chips, as well as other electronic components led exports lower while coal, nonferrous metal and crude oil drove down imports, according to the Finance Ministry. The yen averaged ¥143.02 against the dollar during the period in May, 8% stronger than the same period a year earlier, which weighed on the readings for yen-denominated exports and imports, according to the ministry. The trajectory for trade will be a key factor determining whether Japan's economy enters a technical recession in the current quarter after weak external demand and sluggish private consumption resulted in a contraction in the previous period. In April, exports to the U.S. fell, led by a drop in autos. As with other nations, Japan faces a 25% tariff on cars and their parts and a minimum 10% levy on other goods across the board. Trump doubled a levy on steel and aluminum to 50% in early June, and the 10% tariff is set to revert to 24% in early July, barring a deal. There are early indications that the tariffs are narrowing the U.S. trade gap, in line with one of Trump's goals. The U.S. gap in goods and services trade shrank 55.5% in April from the prior month, as imports fell by a record 16.3%, Commerce Department data showed Thursday. On May 12, the U.S. and China, Japan's two biggest trading partners, announced that they had reached a temporary agreement on reducing tariffs. But tensions have flared since then, with Trump complaining earlier this week that Chinese leader Xi Jinping is "hard to make a deal with.' Japan and the U.S. are continuing to negotiate on the tariffs as they eye possibly announcing a deal on the sidelines of the Group of Seven leaders' gathering in Canada later this month. Japan's top trade negotiator, Ryosei Akazawa, said upon arrival in Washington Thursday that he would continue to press for a removal of all tariffs.
Yomiuri Shimbun
09-05-2025
- Automotive
- Yomiuri Shimbun
Auto Industry Downturn Could Shake Japan's Economy;Blow to Exports Could Undermine Wage Hikes
Yomiuri Shimbun file photo The Toyota logo is seen in Chiyoda Ward, Tokyo, in March 2024. Given that the automotive industry serves as the 'backbone' of the Japanese economy, a decline in its performance could undermine the drive for higher wages in the country. With its extensive reach encompassing global corporations such as Toyota Motor Corp. and numerous small- and mid-sized parts suppliers, the industry supports 5.58 million jobs. Japan's annual automobile exports are worth about ¥20 trillion, accounting for 20% of the country's overall exports. Of the exported units, 30% are destined for the United States, making it a significant market. Amid this situation, the United States imposed an additional 25% tariff on automobiles on April 3 and on auto parts on May 3. Recent figures reflect emerging macroeconomic challenges. As a result, the Bank of Japan significantly lowered its fiscal 2025 projection for econmic growth from 1.1% to 0.5%. According to estimates by Daiwa Institute of Research Ltd., the implementation of 'uniform reciprocal tariffs' of 10% by the United States is expected to lower Japan's growth rate by 0.3%. Sector-specific tariffs on automobiles and steel, among others, would lead to an additional 0.45% decrease. The impact from tariffs on automobiles alone accounts for 0.36 percentage points, or 80%, of this decrease due to that industry's high dependence on exports to the United States. 'Automobile tariffs will have the most substantial negative impact on the Japanese economy,' said Shinichiro Kobayashi of Mitsubishi UFJ Research and Consulting Co. 'The substantial involvement of small- and medium-sized enterprises in parts manufacturing could result in considerable damage to the real economy, underscoring the urgent need to protect this sector,' he said. Major automakers, led by Toyota, have enjoyed strong performance due to the weak yen and have led the trend of significant wage increases in recent spring labor negotiations. However, should they lose momentum due to adverse conditions such as tariffs and a stronger yen, the nationwide drive for higher wages could diminish, potentially resulting in reduced personal spending. 'The wage increases that have become established are in danger of being rolled back,' said Japan Chamber of Commerce and Industry Chairman Ken Kobayashi. The United States has said it will not include automobile tariffs in the agenda for trade negotiations with Japan, raising expectations for challenging discussions. Economic revitalization minister Ryosei Akazawa expressed growing concern, saying: '[Major automobile manufacturers] are incurring hourly losses. We seek to conclude this matter with utmost haste.'
Reuters
02-05-2025
- Business
- Reuters
Japan Q1 GDP likely contracted on soft domestic demand, import surge
TOKYO, May 2 (Reuters) - Japan's economy probably contracted for the first time in a year in the first quarter, weighed down by softer domestic demand and imports outperforming exports, a Reuters poll showed, as U.S. President Donald Trump's trade policies dim the growth outlook. Real gross domestic product (GDP) is forecast to have contracted an annualised 0.2% in January-March, according to a median forecast of 15 economists. That would mark a significant cool down from the previous quarter's 2.2% expansion and would be the first contraction since the first quarter last year. On a quarter-on-quarter basis before annualisation, the first-quarter growth rate was projected at -0.1%, compared with growth of 0.6% in the fourth quarter. Private consumption, which accounts for more than half Japan's economic output, likely inched up 0.1% in the first quarter. Analysts say higher food costs are partly the reason consumers are holding back on spending. "The employment and income situation remains favourable, but consumer sentiment is weakening due to factors such as rising prices and increased thriftiness," said Shinichiro Kobayashi, principal economist at Mitsubishi UFJ Research and Consulting. Capital expenditure was seen up 0.8%, attributed to upbeat corporate performances. External demand, or net exports, which means shipments minus imports, likely shaved 0.6 percentage off GDP growth. Exports were expected to have increased for the fourth consecutive quarter as businesses rushed to ship cars overseas before tariffs took effect. However, Kobayashi said imports probably increased more than exports, resulting in a net negative. The GDP data will be announced on May 16 at 8:50 a.m.(2350 GMT on May 15). The Bank of Japan on Thursday decided to keep interest rates steady and cut its growth forecasts, suggesting that uncertainty over U.S. tariffs and the hit to exports could keep policy in a holding pattern for some time. Rising trade tensions from Trump's sweeping tariffs have sent shockwaves through markets and led to a sharp downgrade in the International Monetary Fund's global growth forecasts.
Japan Times
04-04-2025
- Business
- Japan Times
Japan's household spending drops for first time in three months
Japan's households cut back on spending as inflation remained elevated, in a sign of vulnerability in a key pocket of the economy before sweeping U.S. tariffs hit the country. Household outlays, adjusted for inflation, declined 0.5% in February from a year earlier, the internal affairs ministry reported Friday. The result compared with the median economist estimate of a 0.8% decline. The drop was led by falling outlays on clothes and footwear, housing and food. Consumer spending, accounting for more than a half of the economy, is a key component of gross domestic product that is monitored closely by Bank of Japan Gov. Kazuo Ueda as he mulls the bank's policy path. Inflation has stayed at or above the BOJ's price target for almost three years, sapping spending power, and the latest tariffs from the United States are now expected to weaken the economy further. "We expect personal consumption will be negative compared to the previous quarter in the GDP for the January-March period,' said Shinichiro Kobayashi, chief economist at Mitsubishi UFJ Research and Consulting. "Consumers may not feel a direct impact from U.S. tariffs, but with the stock market falling so much, consumer sentiment is bound to worsen.' The data comes after U.S. President Donald Trump announced across-the-board 24% levies on imports from Japan, which may face a double blow from the measures. The duties will have an immediate impact on the nation's exports. There is also the likely effect on the U.S. economy that could further undermine demand for Japanese goods. Economists say the U.S. will probably see growth slow to an anemic pace even as inflation stays high. Policymakers are watching closely to see if the tariffs trigger a severe downturn in Japan, with some predicting a hit of more than 0.5 percentage point to growth. New 25% car tariffs also took effect Thursday. Until now, data were relatively robust. Japan's overall price growth slowed less than expected to 3.7% in February, driven by food inflation. The price of rice rose 81% from a year earlier, drawing attention from lawmakers concerned about rising household frustration over the cost of living crunch. Base pay for workers increased 3.1% in January, the fastest pace in 32 years although real income dropped. In the latest month, among the few areas that saw increased outlays were utilities, for which expenditures rose 8.7% in real terms versus a year earlier. Prime Minister Shigeru Ishiba's government managed to pass the national budget for this year earlier this week, just before the new fiscal year started. In doing so, he pledged to mitigate the impact from inflation on households. Partly due to elevated costs of living, Ishiba's popularity has sagged. The premier will face a key test in national elections likely to be held in July. The government is considering putting together an extra budget to soften the blow from the U.S. tariffs, the Asahi newspaper reported Friday. Consumer spending, adjusted for inflation, stayed below prepandemic levels last year in Japan's GDP data. Economists expect overall annualized economic growth to be contained at 0.4% this quarter, partly due to lackluster spending momentum, according to a survey last month.
Reuters
14-03-2025
- Business
- Reuters
Japan firms agree to biggest pay hike in 34 years, but will it boost consumer spending?
TOKYO, March 14 (Reuters) - Japanese firms agreed to raise wages by more than 5% on average this year, on course for their most substantial pay hike in over three decades - a relief for many workers though it's unclear if the increases will lead to a meaningful jump in consumer spending. As annual labour negotiations wrapped up this week, many of Japan's biggest companies said they met union demands in full. Some, such as electronics conglomerate Hitachi (6501.T), opens new tab, delivered record pay increases, though a few sectors were left out in the cold. Hefty pay hikes have been seen as essential to counter inflation-induced sharp increases in the cost of living. Many companies, emboldened by record profits on the back of a weak yen, are also keen to retain staff amid labour shortages. More broadly, policymakers have long urged Japan Inc to lift pay so ordinary citizens might break out of a mindset conditioned by decades of deflation that has made them reluctant to spend with confidence. The 5.46% preliminary reading from Rengo, a 7 million member-strong group, represents the third year in a row of substantive increases for base pay and the highest increase in 34 years. It compares with last year's preliminary reading of 5.28% which was then revised down over several stages to 5.1%. Final tallies are usually lower than preliminary figures as most agreements for smaller companies are factored in later. While robust, the headline number was probably not enough to encourage the Bank of Japan to hasten its pace of hiking interest rates every six months or so. Economists also worry that most of the wage growth will go towards offsetting inflation. Headline consumer inflation, including fresh food prices, hit 4.0% in January, a two-year high. Nana Nagayama, 51, who was visiting Tokyo from the northern island of Hokkaido on a graduation trip for her daughter, said her husband hasn't mentioned any expectations of a big increase and expects money to continue to be tight. "This trip, for example, my husband didn't come so we could save money," she said. YOUNGER SPENDING Shinichiro Kobayashi, principal economist at Mitsubishi UFJ Research and Consulting, said younger people who might have large wage hikes were perhaps the most hoped-for driver of consumer spending. "Hopefully having experienced roughly three years of increases to their base pay, young people will be feeling less insecure about the future," he said. Rengo's member unions sought an average hike of 6.09% this year, up from 5.85% in 2024 and much of the focus was on achieving robust pay rises for workers at smaller firms, which employ about 70% of Japan's labour force. They appeared to have had some success with the average pay increase for smaller companies at a preliminary 5.09%, topping 5% for the first time since 1992. Underlining how wage growth is a top priority, Prime Minister Shigeru Ishiba this week ordered authorities to look at ways to encourage higher pay for truckers. He also said the government would consider more measures to help smaller firms pass on costs to customers, enabling them to pay workers more. In some sectors, there was no pay hike. The Japan National Hospital Workers' Union did not receive a response from management to its request for a 40,000 yen ($270) hike to monthly base pay, prompting some 200 workers to go on strike in protest on Thursday. But for those getting hikes, there was a palpable sense of relief. "With the cost of living rising significantly, the wage increase has really helped me feel more at ease both lifestyle-wise and psychologically," said Sakurako Chiba, an employee at a large education-related company in her mid-30s. "Overall, it has motivated me to work harder, which I think is great." ($1 = 148.9 yen)
