Every month we say it, and every month it just keeps getting worse: RIP Abenomics... until next month, when it will be RIP-er. Overnight Japan posted its latest, September, trade numbers which were absolutely abysmal, as the trade deficit rose to a fresh record high of 932 billion yen ($9.5 billion), the 15th consecutive monthly shortfall. The deficit for April-September rose to nearly 5 trillion yen ($51 billion), also a record for the first half of the fiscal year. The reason: as we warned in January when we predicted that the surging import costs of energy and food as a result of the plunging yen will far outweigh any incremental benefits for exports, is that, well, surging cost of energy and food far outweighed any incremental benefits for exports courtesy of the ongoing Yen devaluation. But at least Japan's 0.1%, like the 0.1% in the US and Europe, have their wealth effect. The rest can just go on a diet. And walk getting there since they can't afford gas.
Breakdown by component:
Imports rose 16.5 percent in September from a year earlier to 6.90 trillion yen ($70.3 billion), while exports, helped by recoveries in key overseas markets such as the US and EU, climbed 11.5 percent to 5.97 trillion yen ($60.9 billion). Imports of oil and gas accounted for nearly a third of the total but fell 1 percent as oil prices moderated. Imports of soybeans and other food and machinery surged at double-digit rates. Exports were boosted by rising shipments of vehicles, iron and steel, rubber, chemicals and machinery.
The US remained Japan’s largest export destination, at 1.11 trillion yen ($11.3 billion), while imports totaled 665 billion yen ($6.8 billion). The resulting 533 billion yen ($5.4 billion) surplus rose 25 percent from a year earlier.
The biggest irony, however, was in Japan's trade relationship with its nemesis China, which has once again outsmarted its island neighbor. Instead of escalating militarily over a bunch of rocks in the East China Sea, China is now intent on using Japan as a mercantilist source of GDP growth. And, alternatively, Japan's GDP is getting clobbered thanks to its soaring deficit with China: Japan’s trade deficit with China jumped 87 percent to 620 billion yen ($6.3 billion) as imports of such items as cellphones and solar panels surged 31 percent to 1.68 trillion yen ($17 billion) while exports were up 11 percent at 1.06 trillion yen ($10.8 billion). Japan’s shipments to China, Japan’s biggest trade partner, grew 11.4 percent to 1.06 trillion yen in September, while imports from China soared 30.9 percent to 1.68 trillion yen.
So even as Abe preaches his propaganda pomp while his policies and economy are imploding all around him, China is laughing all the way to the bank as it is sucking its militant neighbor dry.
Some more from SocGen:
In September, Japan’s exports rose 11.5% yoy and imports rose 16.5% yoy. The trade deficit slightly improved from August (¥962.8bn), but remained a high level of ¥932.1bn. The largest contributor to export growth was motor vehicles (+29.9% yoy). We note that motor vehicle exports to China stood out (52.8% yoy in September and 5.4% yoy in August.), supported by the base effect after political tension between China and Japan started to weigh on exports in September 2012.
On a seasonally adjusted basis, exports fell 0.3% mom (after +2.2% mom in August) while imports rose 3.8%mom (after 0.2% mom in August). On balance, the trade deficit (seasonally adjusted) worsened to ¥1091.6bn (after ¥820.8bn in August). In Q3, exports grew by merely 1.4% qoq (after 4.8%qoq in Q2) while imports grew by 4.6% qoq (after 1.6% qoq in Q2).
The worst news: Abenomics is now impacting the country so adversely, the boost in GDP as a result of consumption is now over thanks to a detraction from the net trade deficit: "As a result, the net export contribution to growth is likely to be weaker than we had expected, and it may be around zero in Q3, after 0.5ppt in Q1 and 0.3ppt in Q2." Make that nagative.
Finally, here is Goldman:
Another significant trade deficit in September on higher imports: The trade balance continued to show significant deficit at ¥932.1 bn, following the deficit of ¥962.8 bn in August. Export values came in at +11.5% yoy, slowing down from +14.6% yoy in August. Transport equipment, which accounts for 24% of exports, came in at +19.1% yoy (August: +15.2% yoy). General machinery, which accounts for 18.5% of exports, showed a stable trend, coming in at +7.7% yoy (August: +7.3% yoy). Electric machinery (export share: 18%), however, came in at +5.3% yoy, slowing down from +10.7% in August. Export volume turned negative yoy for the first time in three months, at -1.9% yoy (August: +1.9% yoy).
Import value came in at +16.5% yoy (August: +16.1% yoy), outpacing exports. However, import value of mineral fuels such as crude oil and LNG, which has been a significant factor behind the surge in import value, came in at -1.0% yoy (August: +17.5% yoy), turning negative for the first time since November 2012. On the other hand, there was prominent growth in the import value of electric machinery (+46.6% yoy vs. +21.9% in August, import share: 15%), with semiconductor components, telecomm devices, and electric measuring instruments all growing by more than 50% yoy. The import value of general machinery (import share: 7.4%), also grew 37.9% yoy (August: +21.7% yoy). There is a clearer sign of slowdown in overall import volume, however, which came in at -2.2% yoy (August: -1.9%).
Exports to Asia and Europe slow down, imports from China surge: Looking at exports by region, exports to the US remained buoyant in September in value terms, rising 18.8% yoy (+20.6% yoy in August) while there was a slowdown in exports to Europe (September: +14.3%, August: +18.1%) and Asia (+8.2%; +13.4%), exports to China also declined (+11.4%; +15.8%). Meanwhile, imports from China grew 30.9% yoy (+17.6% yoy in August), contributing to the growth of Japan’s overall import value by 6.7% points. Imports of electric machinery from China, telecom equipment in particular, are growing rapidly, with the September figure coming in at +55.8% yoy (+23.2% in August).
In short: with every passing month Abenomics does merely more of what it was meant to do - cripple the economy, destroy the workers and hurt end consumers, while the soaring stock market helps just the ultra wealthiest. Good job Goldman Sachs advisors to the BOJ.