Japan’s annual export growth in February was short of market expectations and a Bank of Japan policymaker warned about the outlook as the world’s third-largest economy faces a sales tax hike next month that could dent economic activity. The weaker-than-expected trade data comes after a Reuters poll showed that business confidence was largely steady in March, but is expected to slide after the sales tax is raised to 8% from 5% on April 1.
Tepid export growth has been a concern for policymakers, who are counting on stronger shipments to help cushion any slide in domestic consumption after the sales tax rise.
Some market watchers, however, including a central bank board member, doubt there will be an early recovery in exports. BoJ board member Takahide Kiuchi warned that exports could continue to disappoint and that consumer spending could weaken, but said he did not think additional policy easing would help the economy in the long-term.
Exports rose 9.8% in February from a year earlier, following a 9.5% gain in January, as shipments of cars to China and Asia recovered from a Lunar New Year slowdown, ministry of finance data showed.
The modest rise compared with a 12.4% gain expected by economists in a Reuters poll, with US-bound exports slowing sharply. In terms of volume, exports rose 5.4% in February.
“Overall, exports remain sluggish and the situation is severe,” said Takeshi Minami, chief economist, Norinchukin Research Institute in Tokyo.
“Considering that one cannot expect 4-5% growth in the US and Chinese growth remains tepid, both of which will weigh on Asian economies and Japan’s exports. You cannot rely on such a rosy scenario that exports could offset the impact of a sales tax hike.”
Lack of export growth could compel the central bank to announce further monetary stimulus, while the government may resort to more fiscal stimulus to prop up the economy as soon as the summer, Minami said. The BoJ will ease policy again by July as prospects for higher inflation remain remote and the outlook for the economy weakens, a Reuters poll found.