- Koya Miyamae, senior economist at SMBC Nikko Securities
Japan's trade deficit narrowed in September as petroleum imports continued to fall due to weaker global oil prices, while exports climbed at a soft pace. The trade shortfall shrank to 114.5 billion yen last month from 569.7 billion yen in August, the Ministry of Finance reported. Trade balance of the world's third biggest economy remained in deficit for the sixth straight month in September. Exports ticked up 0.6% in twelve months through September, bolstered by a 6.9% increase in electrical machinery and a 3.7% rise in transport equipment. At the same time manufactured goods exports plummeted 8.2% in September. The weak Japanese Yen helped increase the value of exports, but volume declined 3.9%, the third consecutive month recording an annual decline. Exports to China dropped 3.5% from the year before, to 1.11 trillion yen. Meanwhile, exports to the US, Japan's biggest overseas market, surged 10.4% to 1.28 trillion yen. At the same time, imports dropped 11%, to 6.53 trillion yen.
China's slowdown and sluggish domestic demand weighed on factory output and the broader economy, although the BoJ saw the effects of China's slowdown as limited, sticking to its rosy growth outlook. Still, weak indicators will keep the central bank under pressure to ease policy again to hit its 2% inflation target next year.
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