- Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank
Japan's exports declined in November at the fastest pace in almost three years, as shipments to Asia fell in a worrying sign that sluggishness in overseas demand could derail economic growth. Japan's gross domestic product is likely to continue to increase as domestic demand remained strong, but falling exports underscores threats that China's downturn and turmoil in emerging markets poses to growth outlook. Exports decreased 3.3% in November from a year ago, marking the biggest drop since a 5.8% annual decline in December 2012. Japan-made products destined for China plummeted 8.1% year-on-year last month, while exports to the US climbed 2.0%. Imports came in also much weaker than expected, plunging 10.2% over the same period compared with economists' forecast of a 7.3% decline, marking the eleventh consecutive month that imports have dropped. As a result, Japan's trade balance came in a deficit of 379.7 billion yen.
The Bank of Japan is expected to keep monetary policy steady on Friday following the Fed's first interest rate increase in almost a decade. Concerns about foreign demand could complicate the BoJ's task next year as it tries to get consumer inflation to pick up toward its 2% price target.
© Dukascopy Bank SA