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2014 2013 2012

Press Release

Feb. 28, 2014

Total trade sees decline for two consecutive years while Japans trade deficit registers record high

Converting yen-denominated statistics for imports (preliminary) and exports (revised) released by Japans Ministry of Finance in January 2014 to US dollars,
the Japan External Trade Organization (JETRO) found that Japans total trade with China dropped 6.5% to US$311.995 billion in 2013, down for the second
consecutive year.
Exports to China fell 10.2% to US$129.883 billion, posting a double-digit decline for the second straight year, while imports from China fell 3.7% to
US$182.112 billion, making the first drop since 2009. Japans balance of trade logged a deficit of US$52.229 billion.
As a result, Japans deficit with China was recorded as the highest ever, up 17.8% from the previous year.
Also, Japans total exports with the world decreased 10.2% from the year earlier to US$719.332 billion. Chinas contribution ratio in export fluctuation to the
world was the largest ever as a single country with minus 1.9 points. The drop in exports to China became a major reason for Japans decreased exports.

Summary points:

Overview of 2013
1. Exports to China see a double-digit decline for two consecutive years
On the back of Chinas slowdown in domestic demand in line with the countrys economic structural reforms, near-completion of facility investment and
changing demand, a serious decrease was seen in the exports of main products, including general machines such as construction, mining and metal
processing machines, as well as electric devices such as semiconductors. Those of automobiles drastically fell after Japan-related demonstrations in
China and have continued to drop at double-digit level. But the margin of decline was drastically narrower than the 42.8% drop in the first half of the
year.
2. Imports from China decline for first time in four years
With imports, a decrease was noted in manufactured goods such as iron and steel, clothing and clothing accessories and general machinery. Those of
one of the main items, electronic products, posted stagnant growth with a 2.6% rise due to a sharp decline in those of audiovisual products (including
components) despite an increase in imports of communication devices such as smart phones and electronic parts such as semiconductors.
3. Chinas share of total Japanese export ranks second for first time in five years, losing the lead to the US
Chinas share of Japans total trade accounted for 20.0% and that of Japans import value was 21.7%, both continuing to top the list consistently.
Meanwhile, Chinas share of Japans exports was 18.1%, which was ranked second following the US (18.5%), falling from the top for the first time in five
years.

Outlook for 2014

1. The Chinese government has been setting out policies to eliminate excess production facilities and beef up environmental protection regulations while
maintaining stable economic growth. Although the possibility for the government to implement large-scale economic stimulus measures is low, the
previous years brisk growth in industrial production and consumption will likely be maintained. Exports of automobiles and auto component are
expected to rise due to the recovery of Japanese auto sales in China which are expected to rise slightly as a backlash against the second straight year of
decline.
2. With imports from China, the price competitiveness mainly in materials and intermediate products decreased due to a weak yen. However, the imports
are expected to increase on the back of continued strong demand for smartphones, an expected growth of imports for auto components in line with
development of local production and Japans economic recovery.
3. Considering the above, Japan-China trade value throughout 2014 is expected to increase slightly after the second straight year of decline.

Detail analysis

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1.Exports:
Exports decline centering on main items due to Chinas sluggish domestic demand in line with the governments economic structural reforms
In addition to Chinas sluggish domestic demand in line with economic structural reforms by the Chinese government (its real GDP growth rate in 2013 was
7.7%), near-completion of prior facility investments and changing demand, Japans exports to China in 2013 showed a decrease in most items such as
electrical machinery, general machinery and manufactured goods. On the other hand, those of chemical products increased after the previous years decline
thanks to high growth of organic compounds.

Breakdown by product category:

1. A drop by double digits was seen in Japanese exports of electrical power machinery and iron and steel due to sluggish growth in Chinas industrial
production. Those of construction and mining machines also showed a sharp drop by over 50%, led by Chinas slowing fixed asset investment.
2. Japanese exports of machining centers decreased drastically due to near-completion of prior facility investments in order to produce smart phones and
tablet PCs. Therefore, those of metal processing machines rapidly declined.
3. Due to changing demand reflecting the spread of low-priced smartphones and tablet PCs, a drop was seen in Japanese exports of electric products such
as semiconductors mainly in the high price range.
4.
A serious decrease was seen in Japanese exports of automobiles after demonstrations in China related to Japan, but auto sales improved drastically after
September thanks to the active public relations efforts and the launch of a new vehicle model in China. The rate of decline in exports of automobiles
narrowed drastically from 42.8% to 11.6% over the year.

2.Imports:
Imports of various products decline while those of smartphones and photoelectric cell increase
In Japanese imports from China in 2013, those of electronic products posted stagnant growth with a 2.6% rise due to poor sales of liquid crystal televisions,
while those of communication devices centering on smart phones and electric parts such as semiconductors were brisk. In addition, those of general
machines and foodstuff fell from the previous years growth. Also, a decrease was noted in the imports of a variety of products, including a two-year
decrease of chemical products and manufactured goods. On the other hand, those of transportation equipment maintained high growth.

Breakdown by product category:

1. Imports of high-value added communication devices showed a double digit increase backed by continued strong domestic demand for smart phones.
In line with rising domestic demand for solar panels, those of photoelectric cells to be used for the panels increased drastically. In addition, electric
products such as semiconductors showed a drastic increase as those of DRAM rose drastically.
2. With continued sluggish sales of liquid crystal televisions, triggered by rush demand ahead of the end of the eco-point system in Japan, imports of
audiovisual products showed a drastic fall. Also, the rate of decline of iron and steel and non-ferrous metal imports was large, and many items of
foodstuff imports decreased.
3. Imports of transportation equipment overall mostly maintained a high level, as those of automobiles and car components showed an increase together
by double digits. Especially, those of car components such as gearboxes, clutches and drive shafts showed a sharp increase.
4. Imports of clothing and clothing accessories showed a modest rise both in monetary value and quantity centering on high-value added items such as
dresses and suits. Those of seasonal and low-value added items such as underwear T-shirts and chemical fiber knit goods fell totally due to a continuing
trend among manufacturers of shifting production for from China to other Asian countries and regions in search of lower production cost. Chinas share
of Japans clothing imports was 71.5%, down from 74.4% in 2012 while Vietnams share was 8.6%, up from 8.2% in 2012. Myanmars and Indonesias
shares each increased to 3.0%, up from 2.2%.

3.Chinas share of total Japanese export ranks second for first time in five years, following the US
China accounted for 20.0% of all Japanese trade, up 0.3 points from the 19.7% in the previous year. This is the first rise above the 20% level in two years.
While China remains Japans largest trading partner in terms of import and total trade value, export value came second, falling from first place for the first
time in five years since 2008. While Japans share of exports to China was unchanged from the previous year at 18.1%, those of exports to the US rose to
18.5%, up 0.9 points. On the other hand, Japans share of imports from China increased to 21.7%, up 0.4 points from the previous year.

4.Outlook for 2014:

Total trade to increase after the two-year decline
Chinas real GDP growth rate in 2013 stayed flat from a year before at 7.7%, ceasing the slowing drop pace since 2011. The macroeconomic indicator was
almost stable, which is expected to steadily grow 7.0-7.5% in 2014. The Chinese government submitted a policy to comprehensively deepen economic
structural reform at the Third Plenary Session of the 18th CPC Central Committee, taking a stance toward emphasizing stable economic growth and
structure reform. Therefore, despite a low possibility of implementation for large-scale stimulus measures, the Chinese economy seems to remain brisk at
the previous years level in industrial production and consumption. Exports to China in 2014 are expected to see a modest rise as the Chinese economy is
likely to steadily grow, additional exports of passenger cars and car components are expected to be generated thanks to signs of recovery in Japanese auto
sales in China and the comparable statistics base is low due to a two-year decline. While price competitiveness of Japanese products dipped due to the
weak yen mainly in materials and intermediate goods, Japanese imports from China in 2014 are likely to steadily increase thanks to an expected increase in
imports of automobile components led by expanding local production in China and continuously rising demand for communication devices in Japan as well
as Japans economic recovery. Considering the above, Japan-China trade throughout 2014 is likely to increase slightly after the drop for the second
consecutive year.

Exports:
1. Exports of items for infrastructure investment such as construction and mining machines are expected to be continuously slow as investment demand

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led by the government seems to be limited. In addition, those of equipment machinery, parts and raw materials, which are used for production of
finished goods in China, are expected to remain unchanged reflecting Chinas sluggish industrial production as well as development of local production.
2. Exports of automobiles and their components, which were negatively affected by Japan-related demonstrations, are expected to increase due to a
recovery in sales for Japanese auto makers. In addition, if Japanese automobile sales expand continually, exports of raw materials such as iron and steel
and those of the surrounding area such as production facilities are also expected to increase.

Imports:
1. Imports of communication devices are likely to see continuous growth, although the expansion of smart phones is expected to slow compared to the
last few years. Those of auto components, which are used for local production in China, are expected to increase.
2. Although an expansion in demand is expected in Japan on the back of the countrys economic recovery, there is a possibility that rising import prices
may have a negative impact on imports, backed by the lower price competitiveness of Chinese products because of the weak yen, centering on
manufactured goods such as iron and steel and materials and intermediate goods such as chemical products.

*On a yen-basis, figures of Japans total trade with China increased by 14.1% to 30.3 trillion yen, with imports rising 17.4% to 17.7 trillion yen and exports rising 9.7% to 12.6 trillion
yen. From April 1996, the Finance Ministry began releasing trade statistics figures only in yen. Since then, JETRO has converted yen-denominated trade figures to US dollars, based on
the rates posted by the Ministry.
According to the Ministry, as the currency of settlement for Japans exports to Asia in the second half of 2013, the US dollar, Japanese yen and Chinese yuan account for respectively
53.6%, 42.7% and 1.1%, while the figures reach 73.2%, 24.5% and 0.7% for Japans imports from Asia. The US dollar is the most-used currency for trade settlement.

Contact Person: Mr. Kenji SHIMIZU or Mr. Mitsuhiro KAWANO

China and North Asia Division
Tel: +81-(03)-3582-5181 E-mailorg@jetro.go.jp

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