Kristian Rouz — Japanese exports to the US dropped in June for the first time in 17 months, despite Japan's overall trade surplus having increased during that period. This latest data comes on the heels of a freshly inked trade deal between Japan and the EU, which has encouraged companies on both sides to deepen their business ties.
Some Japanese officials have voiced concerns over US President Donald Trump's push to reform the system of international trade, as Japan's exports to the US slid 0.9 percent last month. Official data have revealed a decline in the shipments of automobiles and semiconductors, as American manufacturers increase their presence in their domestic market.
According to the Japanese Finance Ministry, the nation's total exports rose 6.7 percent year-on-year last month to $63 billion. The exports were driven by solid overseas demand for Japanese metals, computers, machinery, and food.
"Overall exports remain healthy for now, but we are not sure how things are going to turn out on the trade policy front," Shuji Tonouchi of Mitsubishi UFJ Morgan Stanley Securities said. "It's possible talk of tariffs and trade friction could reduce corporate investment."
Meanwhile, Japan's imports increased by 2.5 percent to $56 billion — quite a subdued increase despite elevated energy prices in the global markets.
Subsequently, Japan enjoyed a June trade surplus of roughly $7 billion, almost a twofold year-on-year increase, and an impressive rebound from the previous month's deficit of $4.5 billion.
"Even if we take a three-month average, import volumes have been growing at the slowest pace since late 2016 in recent months, which suggests that domestic demand is no longer as vigorous as it was last year," Marcel Thieliant of Capital Economics said.
In a separate report, Reuters Tankan has stated that Japanese private-sector business confidence has worsened in July. The majority of Japanese CEOs have cited their concerns over the US-Chinese trade dispute, backed by two separate US investigations into Beijing's trade practices pertaining to steel overcapacity and intellectual property acquisitions.
The CEOs said Japan could be caught in the crossfire of this dispute, as Japanese steel producers have been allegedly transshipping some of their products through China into the US, whilst stricter intellectual property controls could hinder global exchanges of technology.
However, some Japanese officials are not concerned about the US's move on industrial metals.
"No real effects have emerged from the steel and aluminum tariffs," Japan's trade minister, Hiroshige Seko, said. "So in part, that's why we haven't acted."
PM Abe is seeking to reroute Japanese exports elsewhere for the time being, whilst anticipating a sweeping trade deal with the US, which would ease concerns in Washington, whilst allowing Japan to conduct its business in the American market.
Abe has suggested that a mutual agreement would be good for both sides due to the solid economic ties between the US and Japan.
"The United States seeks a bilateral deal with Japan that is based on the principle of fairness and reciprocity," Trump said, adding that he had encouraged Japanese investments in US manufacturing facilities. "The Prime Minister [Shinzo Abe] told me that will happen. We want new auto plants going into Michigan and Pennsylvania and Ohio."
Despite Japan's exports to the US having dropped, its imports from the US declined in June as well. US shipments to Japan decreased by 2.1 percent, giving Japan a widened trade surplus of $5.24 billion with the US.
This is due to Japan's reliance on the Middle East as its main source of energy, meaning the Japanese-American exchange of goods and capital could indeed be balanced out by a trade deal. Such an agreement could include shipments of American liquefied natural gas (LNG) and oil to Japan, whilst bringing Japanese investments to the US and deepening mutual trade in cars and food.