Demand for Japanese goods in China have plunged across the board since the Senkaku Islands dispute has led to widespread Chinese boycottts of Japanese products. As the FT reports [5], the last 12 months have seen shipments to China plunge over 9% to JPY11.3tn. But have no fear, the credit-loving, all-consuming US citizen stepped up to the plate (though we note not enough since Japan's trade balance has crashed anyway) buying cars, car parts, and electrical machinery. Exports to the US have risen over 10% in the last year to JPY11.4tn - now larger than China. This is the first time since May 2009. Clearly the slowdown in the Chinese economy is also exacerbating the problems for Japan but one analyst warns, "this weakness is structural, not cyclical." The IMF's chief economist was hardly optimistic, noting that the US overtaking China was a "big change" in light of a longer-term trend to deeper intra-Asia integration - "I hope the clouds clear soon." We are sure Abe is watching closely as the US economy also rolls over.
The USA overtakes China s Japan's Top Export Market...
[6]
As the two nations diverge dramatically...
[7]
It is worth noting that while the JPY has devalued 30% in the last 6 months, it has done little to spur significant shifts during that time - look at YoY changes which are pretty much flat (in second derivative terms) which is also reflected in the deterioration of Japan's trade balance overall...
Charts: Bloomberg