A significant decline in Japanese imports indicate that the contribution from net exports to the first quarter gross domestic product should be substantially smaller than the minus 3 percentage point in the fourth quarter last year, BNP Paribas economists said in a note.
Real imports fell 17.7% quarter-on-quarter in the first quarter this year, a massive decline compared to the reading of 0.2 percentage point in the final quarter of 2008.
BNP Paribas economists Ryutaro Kono and Azusa Kato expect net exports to contribute minus 2 percentage points to the first quarter GDP. That said, they noted that the figure would be markedly reduced by the chain-linking method applied in computing GDP. Ultimately, the contribution must be around minus 1.2 percentage point, they added.
On the exports front, bright spots are apparent in the monthly figures for March, economists said, though on a quarterly basis, they have certainly fallen to new record lows. These slight improvements suggest that overseas subsidiaries are modestly increasing incoming shipment levels now that inventories have finally been brought under control.
According to the BNP Paribas economists, if production indeed touches bottom and exports revive, hopes for an economic recovery could spread. However, they cautioned that any upturn by production and exports would be momentary because final demand is unlikely to recover anytime soon.
Further, the economists do not foresee steeper decline in U. S.-bound car exports. The reason they cite is that drastic production cutbacks both locally in the U.S. and in Japan have brought overseas inventories under control. However, they do not expect the U.S. final demand for Japanese cars to revive in the short term, given the steadily worsening employment/income conditions.
Economists pointed out that there are still no sign of stabilization in exports to the EU. With no bottom in sight for the EU economy, it will be a while before Japan's exports to this area can recover.
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