So far, the dispute with China over the Senkaku/Diaoyu islands doesn’t seem to have hurt Japan’s exports to China as much as the headlines might suggest. True, as Dow Jones points out, exports to China were 14.1 per cent lower than in September 2011. However Nomura’s fixed income strategists Naokazu Koshimizu and Asuka Tsuchida note that exports to China actually rose 0.5 per cent compared to August, “suggesting to us little sign of an impact from anti Japan protests in September”.
There could be more to this. Much of Japan’s exports to China are not destined for retail consumers there, so they would seem unlikely to suffer from a nationalistic boycott. Cars are a different story, of course — they’re expensive and clearly branded consumer products that are a significant export category from Japan. However while Japan’s car exports to China fell almost 40 per cent, year-on-year, they made up 34.6bn yen out of almost 1tn yen worth of exports to China that month. Categories such as “raw materials” and “machinery” continued to rise.
In fact it’s slowing Chinese growth that seems the bigger problem, as Koshimizu and Tsuchida write:
“While Chinese economic data for September (industrial production, fixed asset investment, retail sales) surpassed consensus expectations, the lack of evidence supporting sustained demand for Japanese products in China and the global economic growth outlook leads us to maintain our cautious stance on Japanese exports.
How vulnerable is Japan’s economy to the islands dispute? FT Alphaville