Japan's Exports Surge Past Expectations, But Trump Uncertainty Clouds Horizon
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Japan's exports rose more than expected in November, driven by a weaker yen and robust global demand, according to data released Wednesday by the Ministry of Finance, reports Reuters. However, businesses express growing concern that protectionist trade policies under President-elect Donald Trump could undermine future growth.
Total exports climbed 3.8% year-on-year, exceeding the median market forecast of 2.8% and following a 3.1% increase in October. This growth was fueled by strong exports of chipmaking equipment to Taiwan and China, coupled with the favorable impact of a weaker yen.
Despite the impressive growth in value, volumes dipped by 0.1%, suggesting that the yen's depreciation played a significant role in boosting the overall figures.
"The results are not as great as they look," said Koki Akimoto, an economist at the Daiwa Institute of Research, to Reuters. He added that future export prospects are likely to remain flat, with strong demand for chipmaking equipment offset by a potential US economic slowdown and uncertainty surrounding Trump's trade policies.
Exports to China, Japan's largest trading partner, rose 4.1% year-on-year in November. In contrast, exports to the United States fell 8%, primarily due to a decline in automobile exports.
Imports, meanwhile, dropped 3.8% in November, contrasting with market predictions of a 1% increase. This resulted in a smaller-than-expected trade deficit of 117.6 billion yen ($766.17 million) for the month.
The outlook for Japanese exports is increasingly uncertain, with nearly three-quarters of Japanese companies surveyed by Reuters expecting a negative impact on their business environment from Trump's next term as US president. Trump's threats of high tariffs on imports from China, Canada, and Mexico, where several Japanese automakers have factories, are fueling this apprehension.
While uneven global demand may hinder Japan's export engine, the Bank of Japan (BOJ) anticipates a consumption-led recovery that will allow for a gradual increase in interest rates from near-zero levels. The BOJ is set to announce its policy decision on Thursday.