Japanese exports fell 0.1% in August compared to last year. This is the fourth consecutive month in which Japanese exports abroad have posted negative annual growth.
It is clearly the new US tariffs that are penalising Japanese exports. Shipments to the United States declined 13.8% in August, with only partial offsetting increases in Asia (+1.7%) and particularly in Europe (+7.7%).
The automotive sector, which accounts for a third of exports to the United States, was particularly hard hit by the 27.5% tariff surcharge in effect since April. Japanese vehicle exports to the United States recorded an annual decline of 28.4% in August.
Political and economic conditions worsen the scenario
The new trade agreement, which limits US tariffs to 15%, should improve Japanese exports. This 15% rate is, however, penalising, and shipments to the United States will be less dynamic than in the past. This reduced dynamism of exports is condemning the Japanese economy to sluggish growth.
Add to this domestic demand in decline due to demographic decline, and the impoverishment of workers whose wages have been growing less quickly than inflation almost every month for the past three years.
The Prime Minister's resignation, less than a year after taking office, is not helping the situation.
Economy should stay sluggish
The Bank of Japan's wait-and-see attitude, which has maintained its key interest rate at 0.50% despite inflation (2.7% in August) that has exceeded the 2% target for more than three years, is also unlikely to revitalise the Japanese economy.
Given the weak economic outlook, concerns about the yen, which has been weakened by highly accommodative monetary policy and excessive public debt, and after its robust rise in recent years, we are staying away from the Tokyo Stock Exchange.
Do not buy Japanese stocks, since there are more advisable markets. See our asset portfolio allocation suggestion.