What is Japan's largest export

Japan's foreign trade faces headwinds in 2019

Japan's trade balance slipped into negative territory in 2018. Due to the global economic development, industry observers do not expect the sign to change in 2019. After two years with a foreign trade surplus, the country imported more in value than it exported in 2018. The significantly higher prices for petroleum products had an impact on imports, while the international economic slowdown led to exports.

This shows the first effects of the changed international economic environment. The trade dispute between Japan's most important trading partners, the USA and China, which began in the second half of 2018 and has been going on for several months, will have an even greater impact on the 2019 import and export statistics. Given the current background, growth in imports and exports is expected to be in the lower single-digit range at best.

Imports are growing faster than exports

According to the preliminary customs statistics of the Ministry of Finance for the 2018 calendar year, imports based on the local currency increased by 9.7 percent to 82.7 trillion yen compared to the previous year. Converted into US dollars (US $), imports came to around 749 billion US dollars.

The Japanese export value grew significantly weaker by 4.1 percent in 2018 and reached around 81.5 trillion yen. In US $, the export value was around 738 billion US $. Overall, Japan recorded a foreign trade deficit of 1.2 trillion yen, which corresponds to a loss of almost 11 billion US $.

Trade with Germany relatively stable and increasing

One of the countries from which Japan imports more than it exports is Germany. On a yen basis, the deficit with Germany in 2018 was around 563 billion yen or around 5.1 billion US $. Trade between the two countries is proving to be relatively stable and growing. Germany mainly supplies transportation equipment and chemical products.

Germany is Japan's largest trading partner within the EU-28, both in terms of imports and exports. The free trade agreement between Japan and the EU, which comes into force on February 1, 2019, will fundamentally facilitate the exchange of goods. However, EU-Japan trade in the current year will be affected by the weak economy and the as yet unforeseeable effects of Brexit.

China 2018 largest supplier and customer

Apart from the permanent trade deficit with the oil-exporting countries of the Middle East as well as the raw material suppliers Russia and Australia, Japan mainly imports from China significantly more than it exports there. Most of the goods from China are electronic devices, computers, and manufactured goods such as clothing and accessories.

To China, Japan mainly supplies equipment for semiconductor production and electronic components. Nothing in that should change fundamentally. However, industry imports are expected to decline, as orders from foreign electronics manufacturers in China are falling due to the trade disputes. At the same time, Chinese producers are also ordering less.

In 2018, China assumed the position of both Japan's largest supplier and the most important buyer of Japanese goods. Japanese imports from neighboring Asia were at 19.2 trillion yen, more than twice as high as those from the USA. In terms of Japanese exports, China ranked ahead of the US with 15.9 billion yen, but an increase of 6.8 percent compared to 2017. Japan exported around 15.5 billion yen, 2.3 percent more than in 2017, to the main North American market.

Surplus with USA increases pressure

Japan has high surpluses with the USA, and also with Hong Kong, SVR; South Korea, Taiwan and Singapore. However, Japan has by far the largest foreign trade surplus, which was US $ 56 billion in 2018, with the USA. Although the surplus has decreased compared to 2017, it still plays the main role in the trade talks between the USA and Japan for the purpose of a bilateral free trade agreement, which are required for 2019.

Japan's trade surplus with the US is largely due to transportation equipment, especially cars. The transportation equipment segment alone accounted for 38.6 percent of the total Japanese exports in 2018. The second largest item is machines. Japan sources food, chemical products and machinery from the USA.

Japan's imports and exports with main trading partners 2018 (in billion US $; share in percent) *)

Trading partner import proportion of export proportion of
.Asia 355 47,4 405 54,9
..China 174 23,2 144 19,5
..ASEAN 112 15,0 114 15,5
.UNITED STATES 93 12,5 149 20,2
.EU-28 88 11,7 83 11,3
..Germany 26 3,5 21 2,8
.Middle East 94 12,6 22 3,0
.other 119 15,8 78 10,6
A total of 749 100,0 738 100,0

*) Conversion at the exchange rate: 1 US $ = 110.40 yen

Source: Ministry of Finance

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