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Japan's exports, machinery orders seen falling as virus risks grow: Reuters poll

Kitco News

TOKYO (Reuters) - Japan’s exports likely fell for a 14th straight month while machinery orders are expected to have dropped at the fastest pace in over a year, a Reuters poll showed on Friday, as activity in the world’s third-largest economy slows.

While both trade and machinery order data due next week likely predate the significant worsening of the coronavirus seen in January, the outbreak is expected to add to existing challenges for the country’s export and factory sectors.

Exports are expected to have fallen 6.9% in January from a year earlier, after a 6.3% decline in December, the poll of 17 economists found.

Imports likely slipped 1.3% last month, resulting in a trade deficit of 1.69 trillion yen ($15.44 billion), the poll showed, after a revised to 154.6 billion yen gap in December.

Analysts say the expected drops in exports last month were partly due to China’s Lunar New Year holidays and that the hit from the coronavirus outbreak will likely appear in February exports data.

“Previously, we expected exports would pick up gradually as there were signs of recovery in semiconductor manufacturing equipments and electronic components,” said Kenta Maruyama, economist at Mitsubishi UFJ Research and Consulting.

“The timing of the recovery in exports is likely delayed to the middle of this year.”

He said the virus outbreak is expected to weigh on trade through factory output in China, global chain disruptions and stalled logistics.

Core machinery orders, a highly volatile data series regarded as an indicator of capital spending in the coming six to nine month, likely dropped 9.0% in December from the previous month, the poll showed.

It would be the fastest decline since September 2018 when a severe earthquake and typhoons disrupted business activity.

Analysts say the expected falls in core machinery orders in December is partly due to a reactionary fall after they posted record monthly growth of 18% in November.

“Also, uncertainty for the outlook such impact from a sales tax hike remains strong and companies kept their cautious stance on business investment,” said Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute.

The publish machinery orders and trade data are both published on Wednesday.

The poll also found the core consumer price index, which includes oil products but excludes volatile fresh food costs, likely rose 0.8% in January from a year earlier, led by gains in energy costs, ticking up from 0.7% in December.

Reporting by Kaori Kaneko; Editing by Sam Holmes

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