The world’s third-largest economy is struggling to cope with the economic impact of the coronavirus pandemic. Unfortunately, Japan’s exports dropped at a double-digit pace for the fourth month in a row in June. Moreover, the country fell into recession for the first time in 4-1/2 years in the first quarter of 2020. Also, Japan is on course for its deepest postwar slump, as the health crisis is a serious problem for businesses as well as consumers.
Importantly, U.S.-bound Japanese shipments nearly halved again as a result of plummeting demand for cars and auto parts. Furthermore, exports to the country’s largest trading partner remained weak.
According to the Information Ministry of Finance, Japan exports fell by 26.2% in June compared to the same period of time in 2019. This result surpassed expectations. Interestingly, the contraction slowed a bit from the prior month’s 28.3% fall. This was the worst downturn since September 2009.
Moreover, global demand for cars as well as durable goods dropped since March. This is not surprising, as the pandemic forced many countries to impose various restrictions.
Thankfully, many countries started to re-open their economies. Nevertheless, the trade data could diminish hopes for a quick rebound in global demand and the country’s export-led economy. It is worth mentioning that coronavirus pandemic is far from being over, as the number of cases continues to rise in the U.S., India, and other countries.
Local economy and Japan’s trading partners
Based on the forecast of the International Monetary Fund, the global outlook will shrink by 4.9% in 2020. Moreover, the organization predicted a slower recovery in 2021.
Moreover, last month, the International Monetary Fund also changed its forecast regarding growth. The organization downgraded its forecast for the next to 5.4% instead of 5.8%.
Importantly, a massive annual decline in U.S.-bound car shipments had a dramatic impact on the local economy. As a reminder, the automobile industry is very important for the country.
For example, overall shipments to the U.S. declined by 46.6% due to a 63.3% decline in exports of automobiles. Moreover, airline engines also suffered big losses, as exports fell by 56%.
Notably, one of the biggest automakers, Nissan, plans a 30% year-on-year cut in global car output through December. Falling demand created serious problems for the company, as the pandemic complicates its turnaround efforts.
Also, exports to Japan’s largest trading partner fell by 0.2% in the year to June. China has the second-largest economy in the world, and its market is important for Japan.
Moreover, shipments to Asia fell 15.3% and exports to the European Union declined by 28.4%.
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