KUCHING: Malaysia’s exports to and imports from Japan has been foreseen to potentially slow down while the trade surplus could narrow down in October in tandem with the slacks of bilateral trades and also the ongoing trade deficits with the European Union (EU).
Japan’s exports fell for a fifth month in October, hampered by ongoing trade tensions with China and persistently weak demand from the EU region as shipments contracted by 6.5 per cent year-on-year (y-o-y), to 5.1 trillion yen in October, compared with the median estimate for a 4.9 per cent y-o-y decline in exports.
As for the imports segment, it had stumbled by 1.6 per cent y-o-y, thus leaving the world’s third largest economy with a trade deficit of 549 billion yen (US$6.7bn). Trade deficit had nonetheless narrowed from 562 billion yen as recorded in the preceding month.
In October 2012, Japan’s imports from Malaysia had reduced by a considerable 16.3 per cent month-on-month (m-o-m) or 0.4 per cent y-o-y) down to 198.97 billion yen while exports to Malaysia fell by a meager 2.1 per cent m-o-m (up 0.5 per cent y-o-y) to 116.24 billion yen.
Patricia Oh, an economist with TA Securities Holdings Bhd (TA Securities) yesterday stated, “Particularly, Japan’s exports had contracted to a lesser extent as compared to the steeper contraction seen in its overall imports during the recent months.
“As such, we expect an unfavourable trade between Malaysia and Japan considering the contraction in Japan’s trade activities. Note that Japan’s imports from and exports to Malaysia accounts for 3.7 per cent and 2.2 per cent respectively as at year to date October 2012.
“As per Malaysia’s overall trade as at September 2012 though, Japan had contributed 11 per cent to total imports while accounting for 12.2 per cent out of exports to date. Hence, we do foresee a slowdown in Malaysia’s exports to and imports from Japan as well.”
Based on Malaysia’s statistical release for September, “exports to Japan had declined by 2.2 per cent y-o-y totalling RM7.04 billion due to the decrease in the exports of liquefied natural gas.”
“The compression in Japan’s trade could be an indication of lacklustre exports growth for Malaysia during the fourth quarter of 2012,” she told The Borneo Post in an email.
She opined that Japan’s economy was probably at a brim of an economic recession ahead of the general elections on December 16, 2012.
The continued slowdown in Japan might persist given the contraction in exports and also the deficit through trade. Aside from the dispute with China, strong yen currency had contributed towards the lacklustre exports to date, she stated.
“The yen appears to be relatively strong versus the greenback despite the orderly foreign exchange intervention. Following the trade statistical release yesterday though, the yen had depreciated to close at a seven-month low of 82.30 yen per US dollar (or minus 6.4 per cent to date),” she noted.
She added that both the manufacturing growth and factory production in Japan would probably weaken as the economy braced for another slowdown.
Machinery orders had already fallen for two consecutive months in August and September, indicating that companies may hold off on investment outlays on concerns over a slowdown ahead.
Japan’s gross domestic product GDP grew by 2.1 per cent as at year to date (third quarter of 2012), spurred by the rebuilding and reconstruction activities, in comparison with a 0.8 per cent drop seen in 2011.
Meanwhile, a deflationary state resumed for Japan with the consumer price index growth rate trending below zero for four straight months through to September 2012, the economist pointed out.
She made no changes to TA Securities’ forecasts at this juncture and kept the full year 2012 projections for exports, imports and trade balance at one per cent, 5.9 per cent and RM93.37 billion respectively.
When asked by The Borneo Post about risks to the forecast, she stated, “At this juncture, there are uncertainties for international trades in the first half of 2013 on the back of the recessionary risk in Europe.
“Additionally, we do caution the likely down side risk to global growth if the US persists with the fiscal cliff effective January 2013.”