Figures for the world’s third largest economy add new evidence that bottlenecks caused by the Covid virus in supply chains are putting pressure on global trade. Pressures on Japan’s consumer spending will increase if export rates weaken to lead the economic recovery in light of the lifting of restrictions related to the Corona virus and the increase in vaccination rates.The slowdown in trade is also likely to affect new Prime Minister Fumio Kishida’s plans for more economic stimulus. Kishida has announced that he will reveal details of a spending package worth tens of trillions of Japanese yen after the national elections at the end of the month.
Economist Taro Seto of the NLI Research Institute argued: “Exports will remain weak, and it is difficult to predict exactly when they will rise significantly. This is due to the severity of the uncertainty surrounding the supply chain crisis. The fragility of the economy is likely to push the government Towards the approval of a large economic stimulus package.Weak exports is one reason the Bank of Japan is likely to consider lowering its economic growth forecast for the current fiscal year in a central bank report this month, according to people familiar with the matter, who said the supply chain crisis for automakers is one factor to consider.
“In the coming period, we expect the volume of exports to decline during October on an annual basis due to the decline in demand in China and problems related to auto production,” said Yuki Masujima, an economist at Bloomberg Economics.
A trade report revealed Wednesday that auto shipments fell 40% from last year’s level, led by a decline in exports to the United States, whose total shipments fell for the first time in seven months.
However, Japan’s total exports are still 7% higher than the 2019 level.
A 39% rise in imports, led by oil, medical supplies and coal, caused a trade deficit of about 622.8 billion yen (US$5.4 billion). The crude oil price boom contributed to a sharp increase in the value of imports.
Overcrowding in global ports is exacerbating as supply crises triggered by the pandemic rage ahead of the holiday shopping season. Port bottlenecks are stifling global trade and driving up prices that have worried central banks around the world, even though the inflation rate in Japan remains subdued.
The slowdown in economic growth in China, the second largest economy in the world and one of the most important markets for Japan, is an additional factor that may negatively affect trade in the coming months. Last weekend, more than 100 container ships were waiting near the ports of Hong Kong and Shenzhen.
Nevertheless, economists expect the Japanese economy to maintain its growth in the third quarter, even if at a slightly slower pace, as increased business investment and government spending offset lower consumer spending and slowing global trade.
Consumers are believed to help drive economic growth at a faster pace this quarter as Japan’s fourth state of emergency was lifted this month, coronavirus infections dropped sharply and vaccination rates reached 70%. Tokyo is considering removing all COVID-related controls and restrictions on licensed restaurants and bars, according to local media.
Signs are emerging from Toyota Motor Corporation, which is an indicator of the direction of the auto sector, that the difficult period regarding decisions to stop production is over. The automaker last week set production targets in November that exceeded the level of recent years, even as it announced a parts shortage for now.
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