TOKYO (Reuters) - Japan’s exports tumbled at their quickest pace in three years in October, threatening to tip the trade-reliant economy into recession as weakening demand from United States and China darkened the outlook.
Official data out on Wednesday showed Japan’s exports fell 9.2% year-on-year in October, a bigger decline than the 7.6% drop expected by economists in a Reuters poll.
The feeble results, driven by plummeting shipments of cars and aircraft engines to the United States and plastic materials to China, marked the longest run of declines in exports since a 14-month stretch from October 2015 to November 2016.
“The main impression from the figures is that exports to the United States are getting weaker,” said Takeshi Minami, chief economist at Norinchukin Research Institute.
The data comes after a preliminary reading of gross domestic product last week showed Japan’s economy post the worst growth in a year in the third quarter.
Lawmakers have called on the government to boost spending by as much as 10 trillion yen ($92.08 billion) for the current fiscal year to support the economy, which many fear is facing additional pressure from a sales tax hike that took effect in October.
The government has said it plans to compile a stimulus package as soon as possible as a pre-emptive measure against heightening overseas risks.
Some analysts have warned that the sales tax hike could damage the world’s third-largest economy, as the last such increase did in 2014, especially if domestic consumption cools sharply.
While fiscal stimulus could help offset risks, such measures are unlikely to support the economy until next year, said Minami.
“There’s a lag before fiscal stimulus measures come into effect and it’s unclear how much effect they will have.”
The Bank of Japan kept monetary policy steady last month but gave its strongest signal that it may cut interest rates in the near future.
The export slowdown was partly due to strengthening of the yen in October and a typhoon hitting Japan, said Taro Saito, executive research fellow at NLI Research Institute.
“There was a large fall, but it isn’t so bad when taking the impact of the typhoon into account,” Saito said.
Exports in volume terms, which excludes the exchange rate impact, slumped 4.4% in the year to October, the third consecutive month of declines and the largest fall since a 6.0% drop in August, the finance ministry said.
(For an interactive graphic on Japan's exports and imports, click: tmsnrt.rs/2KA8H2k)
By destination, exports to China, Japan’s biggest trading partner, slipped 10.3% year-on-year in October, down for the eighth month as shipments of plastics and car parts declined.
Exports to Asia, which account for more than half of Japan’s overall exports, tumbled 11.2% in the year to October, down for the 12th month.
Japan’s exports to the United States dropped 11.4% in the year to October, hurt by reduced shipments of 2,000 to 3,000 cc cars, aircraft engines and car parts.
Japan’s lower house of parliament approved on Tuesday a limited trade deal Prime Minister Shinzo Abe agreed with the United States, clearing the way for tariff cuts next year on items including U.S. farm goods and Japanese machine tools.
The nation’s overall imports sank 14.8% year-on-year, a smaller decline than the median estimate for a 16.0% decrease.
That pushed the trade balance to a surplus of 17.3 billion yen, from a deficit of 124.8 billion yen and against a 301.0 billion yen surplus expected by economists.
($1 = 108.6000 yen)
Reporting by Daniel Leussink; Editing by Shri Navaratnam and Sam Holmes