Tag Archives: Exports

Slumping Japan exports, factory orders add to headaches for PM Abe, BOJ

Reuters, May 23, 2016

JAPAN - MARCH 14:  A sign for the Bank of Japan is seen in Tokyo, Japan, Wednesday March 15, 2007. The yen held near a one-week high versus the dollar and advanced against the U.K. pound as investors reduced holdings of higher-yielding assets purchased with money borrowed in Japan.  (Photo by Torin Boyd/Bloomberg via Getty Images)
JAPAN – MARCH 14: A sign for the Bank of Japan is seen in Tokyo, Japan, Wednesday March 15, 2007. The yen held near a one-week high versus the dollar and advanced against the U.K. pound as investors reduced holdings of higher-yielding assets purchased with money borrowed in Japan. (Photo by Torin Boyd/Bloomberg via Getty Images)

Japan’s exports fell sharply in April and manufacturing activity suffered the fastest contraction since Prime Minister Shinzo Abe swept to power in late 2012, providing further evidence that the premier’s Abenomics stimulus policy is struggling for traction.

The bleak readings on the health of the world’s third-largest economy follow Japan’s failure last week to win support from its global counterparts to weaken the strong yen, which Tokyo fears could do further damage to the sputtering economy.

They also add pressure on both Abe and the Bank of Japan to do more to rev up flagging growth, even as economists and global investors worry that central banks may be reaching their limits with radical experiments that have yet to kick-start growth.

Data on Monday showed Japan’s exports fell 10.1 percent in April from a year earlier, the fastest decline in three months as a stronger yen and weakness in China and other emerging markets take their toll on the country’s shipments.

Imports shrank more than 23 percent, reflecting not only lower commodity prices but stubbornly weak domestic demand that has defied a massive asset-buying program by the BOJ which is now into its fourth year.

The decline was likely exaggerated by a drop in U.S.-bound car exports due to supply-chain disruptions caused by earthquakes in Japan last month, but a firmer yen and lackluster global demand are clouding the outlook for 2016. Some analysts fear the economy could contract this quarter after dodging a return to recession early in the year.

“Drops in U.S.-bound car exports were noise,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

“Asia and the global economy remain weak. On top of that, yen gains squeeze profits at exporters, causing wages and capital spending to weaken, which would hamper ‘Abenomics’ aim of creating virtuous growth,” Minami said.

STRONG YEN PUTS JAPAN IN A BIND

Japanese officials recently threatened to intervene in foreign exchange markets to halt “disorderly, one-sided” moves as the yen bolted to 18-month highs, but the United States issued a fresh warning to Tokyo on Saturday against weakening its currency, overshadowing a Group of 7 finance leaders’ gathering to discuss how to revive growth.

Bank of Japan Deputy Governor Hiroshi Nakaso, while declining to comment on how a strong yen could affect its policy decisions, said on Monday it was desirable for currency rates to move stably, reflecting economic fundamentals.

“The desirability of exchange-rate stability is widely shared by the Japanese industry,” he said at a seminar.

The BOJ is widely expected to expand policy again by July, after shocking global markets by moving to negative interest rates earlier this year. Such a move, along with a possible interest rate hike by the U.S. Federal Reserve, could take some fire out of the yen.

Abe is widely expected to unveil an additional budget this summer, and many analysts expect he will postpone a sales tax increase slated for early next year, though officials have publicly said they will press ahead with the plan barring a massive shock to the economy.

A private business survey on Monday suggested more pain ahead for Japanese manufacturers. The Markit/Nikkei preliminary survey for May showed factory activity shrank for the third straight month while total new orders declined at the sharpest pace in 41 months.

Exports to China – Japan’s largest trading partner – fell 7.6 percent in April, while the U.S.-bound shipments fell 11.8 percent year-on-year. Car exports to the United States fell 4.4 percent, down for the first time since November 2014.

Exports to Asia, which accounts for more than half of Japan’s shipments, fell 11.1 percent in the year to April, but EU-bound shipments rose 9.9 percent.

Toyota Motor Corp (7203.T) recently forecast a bigger-than-expected 35 percent tumble in net profit for the current year due to the sharp appreciation of the yen, ending three straight years of record profits driven in part by a weak currency. But it still expected global sales to inch up this year.

The yen was trading around 110 to the dollar JPY= on Monday, pulling back from a high above 105 yen earlier this month, its strongest since late 2014.

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China Trade Surplus Swells as Exports Rise in Boost for Yuan

Bloomberg, Jan 13, 2016

* The economy “is stabilizing rather than collapsing”: Oliver
* “This could be the beginning of an improvement”: Ding

China’s trade surplus widened and exports recovered last month, offering support to a weakening currency that has roiled global markets this year.

The nation’s trade balance widened to $60 billion, taking the full-year tally to $594.5 billion, helping offset capital outflows that have pressured the yuan. Exports slid 1.4 percent in U.S. dollar terms in December from a year earlier, and rose when counted in the local currency.

Asian equities and the Australian dollar climbed. China’s tumbling shares, which fell again Wednesday, and its weakening currency have shaken global markets in 2016, eroding confidence in an economy that’s struggling to stabilize after it likely grew last year at the slowest pace in a quarter of a century.

“The Chinese economy is stabilizing rather than collapsing,” said Shane Oliver, head of investment strategy and chief economist at AMP Capital Investors Ltd. in Sydney, adding that the trade surplus weakens the case for a substantial yuan depreciation. “Last week’s renewed share market turmoil in China owed more to regulatory issues around the share market than telling us much about the state of the Chinese economy.”

Exports climbed 2.3 percent in yuan terms from a year earlier, the customs administration said Wednesday, compared with a 3.7 percent drop in November. Imports extended a stretch of declines to 14 months, falling 4 percent in yuan terms, compared with a 5.6 percent drop a month earlier.

In U.S. dollar terms, imports fell 7.6 percent from a year earlier, less than the 11 percent drop forecast by economists. In volume terms, the import data looks better, Bloomberg Intelligence economists Tom Orlik and Fielding Chen wrote in a note.

“China’s purchases of major commodities remain on trend, and even accelerated slightly in December,” they wrote. “Commodities markets might be concerned about China’s growth outlook, but based on current purchases there’s little cause for alarm.”

China imported a record amount of crude last year as oil’s lowest annual average price in more than a decade spurred stockpiling and boosted demand from independent refiners. Iron ore imports jumped to a record last month, while steel exports climbed as the nation sells its glut overseas.

Hong Kong

Raising question marks over the sustainability of any export recovery, shipments to Hong Kong led the advance last month. Economists said the surprise gains may harken back to past instances of phony invoicing and other rules skirted to escape currency restrictions.

The MSCI Asia-Pacific Index jumped by the most in four weeks, led by gains in Japan and Hong Kong, and the Stoxx Europe 600 Index climbed for a second day. U.S. stock futures rallied after the Standard & Poor’s 500 Index rose. Copper gained for the first time in more than a week and South Africa’s rand strengthened.

A sustained pick up in exports may relieve some of the pressure on the yuan to weaken, countering capital outflows and concern over the economy’s slowdown.

Recovery Signs

“This could be the beginning of an improvement in China’s trade data,” said Ding Shuang, chief China economist at Standard Chartered Plc in Hong Kong. “When the exchange rate starts to move it usually takes about three to six months for trade data to respond. Last August was the beginning, so it makes sense for the trade data to respond after three to four months. ”

Going forward, Ding expects a “very stable” effective exchange rate against a basket of currencies. “That will help China to regain competitiveness,” he said.

Seasonal Jump

The increase in exports last month may prove to be a temporary one due to a seasonal jump at the end of the year and it doesn’t represent a trend, a spokesman for the customs office said after a briefing in Beijing.

“There will be some front-loading of shipments before the Chinese New Year, but that boost could fizzle again quickly thereafter,” said Frederic Neumann, co-head of Asian economic research at HSBC Holdings Plc in Hong Kong. “Exports are unlikely to deliver a growth impulse this year to China and the rest of Asia. It’s all about domestic demand. Don’t look to the external side to pull Asia out of its growth malaise.”

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John Rubino: The Shrinking Global Economy, In Three Charts

By John Rubino, Jan 10, 2016

Regular contributor Michael Pollaro offers three more charts which tell a story that’s both disturbing and apparently misunderstood by a lot of mainstream analysts.

The US trade deficit (exports minus imports) has been getting smaller. Since a trade deficit subtracts from GDP growth, a shrinking deficit will, other things being equal, produce a bigger, faster-growing economy (that’s the mainstream take).

US trade balance

But other things aren’t equal. It turns out that the components of that trade balance figure are both shrinking. Exports — the stuff we sell to foreigners — have been declining since the dollar spiked in 2014. That’s not a surprise, since a strengthening currency makes exports more expensive and thus harder to sell. So other countries are buying less of our stuff, which though not surprising is a bad sign.

US exports

Meanwhile, imports — stuff we buy from abroad — have also plunged in the past year, which is partly due to cheaper oil lowering the dollar value of energy and other commodity imports. But it also means that even though French wine and German cars have become less expensive as the dollar has soared against the euro, we’re not buying more of them. So US consumers, even with all the money they’re saving at the gas pump, still can’t (or won’t) take advantage of a sale on imported goods.

US imports

If imports and exports are both falling, that means consumption is weak pretty much everywhere. And weak consumption means slow or negative growth, which contradicts the recovery thesis that now dominates policy making and the financial media.

It also makes last week’s market turmoil easier to understand. Falling trade means lower corporate profits, which, if history is still a valid guide, means less valuable equities. So it could be that the markets are simply figuring this out and revaluing assets accordingly.

This article is written by John Rubino of Dollarcollapse.com and with his kind permission, Gecko Research has been privileged to publish his work on our website. To find out more about Dollarcollapse.com, please visit:

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Yuan Seen Needing Bigger Depreciation for China to Reap Benefits

Bloomberg, Jan 8, 2016

A pedestrian walks past a Chinese yuan currency sign in Hong Kong on August 11, 2015. China's central bank cuts the reference rate for its yuan currency against the US dollar by almost two percent, reportedly a record reduction, as it seeks to bolster flagging economic growth. AFP PHOTO / Philippe Lopez

* Currency must fall another 14% to spur 0.7 points of growth
* Risk is that debasing the yuan can lead to capital outflows

The yuan, which has fallen 5 percent since China’s central bank devalued the currency in August, probably needs to fall an additional 14 percent if the nation’s economy is to see any real benefits.

A decline to 7.7 per dollar, from about 6.6, is needed to boost gross domestic product expansion by 0.7 percentage point, according to estimates by Bloomberg Intelligence Economics. The move, a scenario which none of the analysts in Bloomberg surveys expects, would lead to $670 billion in capital outflows.

The trick for Chinese officials is to manage the currency lower without sparking a mass exodus of capital from the country. The drop in China’s exports is mainly the result of sluggish global demand, and the collapse of the yuan would only increase the risk of competitive devaluations in neighboring countries — creating a so-called currency war.

“They don’t want an excessive devaluation,” said Sacha Tihanyi, senior emerging-markets strategist at Toronto Dominion Bank in New York. “I don’t think they’re trying to achieve some kind of export advantage through currency devaluation.”

The yuan slid to a five-year low of 6.5956 per dollar in Shanghai on Thursday after the central bank cut the fixing, extending its decline over the past year to 5.7 percent. The People’s Bank of China halted an eight-day run of cuts to its reference rate for the currency on Friday, leaving the offshore exchange rate little changed at 6.6840 per dollar as of 6:46 a.m. New York time.

The gap with the onshore level was at 1.4 percent. It widened to a record 2.9 percent on Thursday before tightening amid suspected intervention.

Exports Decline

China’s exports fell for a fifth month in November, the customs administration said at the end of last year. Gross domestic product growth will slow from 6.9 percent in 2015 to 6.5 percent this year, according to a Bloomberg survey.

To lift export growth by 10 percent this year would require a 13 percent drop in the yuan on a trade-weighted basis, the historical relationship between the two suggests, according to Bloomberg Intelligence analysts Fielding Chen and Tom Orlik. That implies that the yuan needs to decline to about 7.7 per dollar, which would be the lowest since 2007. Option traders assigned a 13 percent probability of reaching it this year.

Only one analyst among 64 surveyed by Bloomberg expects the yuan to weaken beyond 7 per dollar this year. Analysts at Rabobank Group of the Netherlands are the most bearish, predicting the yuan will weaken to 7.6 per dollar by the end of December. That compares with the median forecast of 6.65 per dollar.

Mixed Signals

The People’s Bank of China has sent mixed signals about the goals of its currency policy. The authorities have repeatedly pledged to keep the yuan stable, drawing down a record $513 billion from foreign reserves last year to shore up the exchange rate. At the same time, the PBOC set its reference rate at unexpectedly weak levels this week, raising speculation that it’s become more tolerant of depreciation and rattling global markets.

Analysts at JPMorgan Chase & Co. lowered their year-end yuan forecasts Thursday to 6.9 per dollar, from 6.7, saying the weaker fixings were a “clear confirmation of a shift in the mindset of Chinese authorities” in favor of a weaker yuan versus the dollar.

Economic Improvements

The currency decline is at odds with recent signs of economic stability. Monthly indicators due Jan. 19 are poised to show continued gains in retail sales, and some acceleration in industrial output from November to December, according to Goldman Sachs Group Inc. Evidence also indicates that house prices are steadying, metals prices have picked up from historical lows and demand for credit is reemerging.

While exports are slowing, they’re more or less in line with other nations as global trade stagnates. Overseas shipment in China fell 6.8 percent in November, compared with a 6.3 percent drop in Taiwan and a 4.8 percent decline in South Korea.

If anything, Chinese exporters are edging out their competitors, hardly a sign of currency overvaluation. The country’s share of global exports surged to about 14 percent in July, from 8.7 percent in January 2010, according to data compiled by Bloomberg.

Further depreciation fuels expectations of more weakness and capital outflows, according to Chris Turner, London-based head of currency strategy at ING Groep NV. Outflows amounted to almost $1 trillion in the year through November, according to Bloomberg data.

“The PBOC want to keep it ‘basically stable’ against a basket of currencies,” said Turner. Losing control of the yuan “could trigger more capital outflows” and that would be their main concern, he said.

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When It Rains It Pours as China Unleashes Commodity Torrent

Bloomberg, Dec 8, 2015

china_resources

* Net oil-product exports surge to record; aluminum, steel rise
* Flood threatens global producers, prompts trade disputes

There’s no let-up in the onslaught of commodities from China.

While the country’s total exports are slowing in dollar terms, shipments of steel, oil products and aluminum are reaching for new highs, according to trade data from the General Administration of Customs. That’s because mills, smelters and refiners are producing more than they need amid slowing domestic demand, and shipping the excess overseas.

The flood is compounding a worldwide surplus of commodities that’s driven returns from raw materials to the lowest since 1999, threatening producers from India to Pennsylvania and aggravating trade disputes. While companies such as India’s JSW Steel Ltd. decry cheap exports as unfair, China says the overcapacity is a global problem.

“It puts global commodities producers in a bad situation as China struggles with excess supplies of base metals, steel and oil products,” Kang Yoo Jin, a commodities analyst at NH Investment & Securities Co., said by phone from Seoul. “The surplus of commodities is becoming a real pain for China and to ease the glut, it’s increasing its shipments overseas.”

Net fuel exports surged to an all-time high of 2.22 million metric tons in November, 77 percent above the previous month, customs data showed. Aluminum shipments jumped 37 percent to the second-highest level on record while sales of steel products climbed 6.5 percent, taking annual exports above 100 million tons for the first time.

Chinese oil refiners are tapping export markets to reduce swelling fuel stockpiles, particularly diesel. The nation is also encouraging overseas shipments by allowing independent plants to apply for export quotas to sustain refining operation rates and ease an economic slowdown, according to Yuan Jun, general manager at oil trader China Zhenhua Oil Co.

Economic Slowdown

A slowdown in domestic aluminum demand has coincided with the start-up of millions of tons of new capacity in the world’s biggest producer while Chinese steelmakers battling losses have stepped up exports to compensate for shrinking consumption at home as economic growth weakens. The country makes about half the world’s steel.

The flood of Chinese supplies is roiling manufacturers around the world and exacerbating trade frictions. The steel market is being overwhelmed with metal from China’s government-owned and state-supported producers, a collection of industry associations have said. The nine groups, including Eurofer and the American Iron and Steel Institute, said there is almost 700 million tons of excess capacity around the world, with the Asian nation contributing as much as 425 million tons.

Steel Curbs

Low-cost supply from China in Europe prompted producer ArcelorMittal to reduce its profit forecast and suspend its dividend. India’s government has signaled it’s planning more curbs on steel imports while regulators in the U.S. are planning to lift levies on shipments from some Chinese companies.

It’s not all one-way traffic. Copper imports into the country, the biggest refined metal producer and user, surged to the highest in 22 months in November as traders sought to profit from cheaper prices in London and financing demand rose before the end of the year. China’s crude purchases climbed 3.8 percent and the nation bought 8.8 percent more iron ore.

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