A territorial dispute between China and Japan may further hurt trade between the world’s second and third largest economies this fall as new trade figures from Japan reveal that exports fell 10.3 percent year-over-year in September, the fastest contraction since the March 2011 earthquake and tsunami that devastated parts of the country and global supply chains.
Exports to China last month were down 14.1 percent from a year earlier, while shipments to the European Union dropped 21.1 percent. September was also the fourth successive month of Japanese export decline.
Analysts now expect trade to further deteriorate in the final quarter with no end in sight to the diplomatic clash over the Senkakus islets in the East China Sea, which Japan nationalized on Sept. 11. The move sparked protests and boycotts of Japanese products in China, who also claims the islands and calls them Diaoyu.
Exports of cars, car parts, electronics and machinery are forecast to be hit hardest.
Japanese manufacturers’ sentiment hit its lowest levels since January 2010, according to a Reuters poll in October, with anti-Japanese feeling in China cited by many firms as a major cause for pessimism.
Japanese automakers’ sales in China plummeted 49 percent in September compared to a year earlier, and several manufacturers have already made major cuts to production.
“In September, we did not see a clear decline in either air or ocean freight,” said Yoshiki Mizokuchi, Japan Country Manager for logistics giant Panalpina. “However, the carriers expect severe volume drops in October-November because less cars are expected to be purchased in China.
“With regards to air freight, Japan Airlines has decided to reduce the number of passenger flights from 14 to seven per week from this month on as they expect less tourists,” he said.
“If the situation becomes a prolonged one, it will affect the market volume being moved between China and Japan.”
Mizokuchi is, however, confident the dispute will be eventually be resolved because the consequences of failing to find common ground are too great for both countries’ economic prospects.
“In the short term, at max up to December, the situation is likely not to improve but in the in the mid/long term the situation will get back to normal because the Chinese manufacturers need key components, materials and machineries from Japan” he said.
“China is basically a country of assembly and it depends on the Japanese quality products for its exports. [These products] cannot be easily replaced by another country or supplier,” he said. “Japan and China share their destinies regardless of whether they like it or not.”