Japan's trade sector has been shaken again following the March export data report which dropped 11.7 percent on an annual basis (Year-over-Year). This figure is worse than economists' forecasts for a decline of 9.4 percent and far lower than the weakening of 1.0 percent in the previous period. In general, Japan's export trends have not been able to move from the negative territory that has occurred since early 2019.
Last month's export slump was caused by the falling demand for Japanese goods from abroad, especially from the US and China as the main trading partners. Both China and the US are both struggling to fight the spread of the COVID-19 Pandemic which has an impact on the decline in economic activity in their respective countries.
Specifically, shipments of goods to the US such as cars and electronic products decreased 16.5 percent in March; The biggest decline since April 2011. Weak demand from the US also occurred in construction goods, engines, and illegal aircraft.
Meanwhile, Japanese exports to China plummeted 8.7 percent, led by weak demand for auto parts and semi-conductors. Exports to countries by Japan, which can contribute more than half of total exports also fell by -9.4 percent.
Japan's Economic Activity Potential to Decline Given the Continuing Demand
In the midst of falling demand for goods from abroad, there is the potential for a massive slowdown in the Japanese economy in the coming months. The reason is that the Japanese government last week expanded the scale of the COVID-19 emergency to the national level, following a surge in patients infected with the Corona virus in recent weeks.
That means, Japan's economic activity has the potential to fall further and will have an impact on the demand for goods and services. As such, it is almost certain that the Japanese economy will contract again in the first quarter of this year.
PM Shinzo Abe announced the expansion of the state of emergency to the national level until May 6, 2020. Previously, the state of emergency was only applied to seven (7) prefectures. This new decision illustrates the worsening spread of the Corona virus pandemic (COVID-19) in the country of Sakura.
As of Friday (17 / April), Japan has recorded a total number of 9,231 cases of the Corona virus infection. The data ranked him 24th worldwide in total cases, with 190 dead and 935 recovering.
Japanese Yen Relatively Calm From Existing Data
Japan's data is actually not as bad as a number of other developed countries such as the US, UK, and Eurozone. However, there is increasing pressure on policy makers to take more decisive steps in tackling the plague. Japan's health service capacity is feared to be inadequate and will collapse if the spread of the virus accelerates.
Speaking at a special meeting of medical experts yesterday, Abe said, "The area where emergencies must be enforced will be expanded from seven prefectures to all prefectures". In line with that, Abe also said he would urge the ruling party to increase the number of cash subsidies from 300 thousand Yen per household to 100 thousand Yen per person.
However, the methodology for applying an emergency is expected to be the same as before. Emergency conditions in Japan are not the same as lockdowns in other countries. In an emergency situation, Japanese citizens are only encouraged to stay at home. There is no strict punishment or patrol of the apparatus for those who do not obey it. Some companies in certain non-essential industrial sectors such as restaurants and inns can also still operate.
Responding to this news, the Japanese Yen is relatively calm and shows mixed performance. The USD / JPY currency pair weakened around 0.2 percent, while GBP / JPY and EUR / JPY traded almost flat.
