Kantaro Koiya and Daniel Leussink

TOKYO, Reuters – Japan’s exports fell after seven consecutive months of double-digit growth in October. This was due to slowing U.S.-bound vehicle shipments from China and the consequent global supply shortages.

Slowing Japan’s growth is a sign of Japan’s vulnerability for supply chain disruptions, which have had a particularly negative impact on the auto industry and cloud the outlook for overseas orders.

According to Ministry of Finance data, exports increased 9.4% in October compared with the previous year. This was slightly lower than the median forecast by Reuters for a 9.9% rise. The previous month saw 13.0% growth.

The region-based increase in exports to China was 9.5% for the 12 months ending October. It is down from 10.3% the month before, but it still represents a significant improvement over the 10.3% monthly growth. Car shipments to China dropped 46.8%.

U.S. bound shipments to Japan, another important market, increased by 0.4% in October. This was also due to declining auto exports which dropped 46.4%.

The median estimate of a 31.9% rise in imports for the year ended October was 26.7% higher than the actual figure. This brought the deficit to 67.4 Billion Yen ($586.60 Million) compared to the median estimate of a 310.0 Billion yen deficit.

A separate report by the government showed that core machinery orders were down in September compared to the preceding month. It is a key indicator of future capital spending and was lower than the expected 1.8% rise.

Core orders that were weaker than anticipated indicate corporate Japan’s unwillingness to spend more capital. Global supply shortages are a threat to Japan’s outlook for exports and output.

Following a 0.7% rise in the prior quarter, core orders are expected to increase 3.1% by October-December according to manufacturers.

Japan’s economy contracted quicker than expected during the third quarter. The reason was declining consumption, business expenditure, exports and exports. Also, there were a rise in COVID-19 and supply interruptions for chip and parts.

On Friday, the government will announce a fiscal stimulus package in the amount of “several tens to trillion yen”. This is aimed at relieving the suffering of the COVID-19 epidemic and revitalizing the economy.

($1 = 114.9000 yen)