Row with China a key factor in lower Japanese exports

Exports to China has dropped by 14.1% in the year to September 2012 while overall exports have also fallen by a significant 10.3% leaving a trade deficit of $ 7 billion last year, according to the Japanese Ministry of Finance.

Adding to the economic woes, the Bank of Japan has also recently cut growth outlook for eight out of nine regional economies within the country and many analysts expect Japan to hit a recession.  This is in line with other major Asian economies that are all starting to feel the impact of the slow down in their major export markets in the West. 

The rise in value of local currencies in the region are not helping the exporters’ cause and except for the Singapore Monetary Authority, all major central banks in the region have stepped in to reduce the high value of the currency.

The world’s third largest economy, Japan’s situation has been exacerbated by the row with China over disputed islands in the East China Sea.  Following Japan’s acquisition of the islands in recent past, there were widespread protests in China.  Many of those protests got violent and their targets were Japanese companies and expatriates.

A new poll from Reuters shows that Japanese manufacturing confidence has dipped to its lowest since January 2010 and most firms do not expect the situation to get much better.  And they blame Sino-Japan relations for the major dip in confidence.

“The worsening of exports reflected both the global slowdown and anti-Japan protests in China," Naoki Iizuka, from Citigroup Global Markets in Tokyo told the BBC. "Exports will likely fall even further and the trade deficit will grow in October as the impact from the boycotting of Japanese products will play out more clearly".