Japanese exports, core machinery orders decline amid coronavirus risks

Japanese machinery orders fell at the fastest pace since 2018, while exports declined for its 14^th straight month as Japan’s economy struggled against the impact of the recent sales tax hike and the novel coronavirus outbreak.

Exports declined by 2.6% in January compared to the previous year, smaller than a 6.9% decline predicted by analysts. It was pulled by cars, construction, and mining machinery shipments to the U.S.

Core machinery orders dropped 12.5% in December, higher than a 9.0% decrease estimated by analysts. Core machinery orders are volatile data seen as a major indicator of capital spending for the next six to nine months.

The figures emphasize Japan’s need to overcome domestic and outside issues, leaving no space for policy maneuvering. Japan is currently on the brink of economic recession.

New Year holidays in Japan and China may have caused a larger impact on January exports than the coronavirus outbreak, but analysts expect weaker China-bound shipments as the full scope of the virus’ effect on demand may hit in February.

Senior economist Koya Miyamae of SMBC Nikko Securities said that the coronavirus spread extended the closing of many factory operations in China, as well as a drop in capacity utilization. The impact may continue on to February and reflect in Japanese exports.

Ministry officials have yet to determine how China-bound shipments were affected by the virus outbreak.