With GDP growth slowing to 0.3 percent in the April-June period, Japan is hoping for an economic rebound led by exports as it has relied on previously, but this time around, global factors are standing in the way.
Europe, China’s largest export market, is suffering a slump due to the widespread debt crisis, with unemployment at record high levels in many nations across the Continent. These slumping economies are impacting China's economy, which means sluggish export demand from Japan.
In Japan, exports usually exceed imports, contributing to growth. But exports and imports in total pushed down the growth rate by 0.1 percentage point in the April-June quarter.
Imports are at high levels as the country needs more natural gas and other fuels to feed thermal power plants, with 48 of the nation's 50 nuclear reactors remaining idle after the onset of the accident at the Fukushima No. 1 nuclear power plant last year.
And exports have been failing to make up the difference.
Top officials at major construction equipment makers expressed their difficulties at news conferences for earnings announcement in late July. They pointed in particular at China as the cause.
“Sales of construction equipment in China fell more than 40 percent year on year,” said Toyoaki Nakamura, executive vice president at Hitachi Ltd. “A market recovery by year’s end is unlikely.”
“Demand in China has declined more widely than expected,” said Hiroaki Fujiwara, executive vice president at Kobe Steel Ltd. “I think it is hitting bottom, though.”
According to the Japan Construction Equipment Manufacturers Association, shipments of construction equipment in June were down from the same month last year, marking the first drop in two and a half years. Exports to China, in particular, plunged 74.1 percent.
The Chinese economy grew 7.4 percent in real terms in the April-June period, but the figure is substantially lower than the approximate 10 percent growth rate that the country enjoyed until 2010.
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