Japan: Exports improve as prospects for 2021 brighten

Export volumes improved notably in January, rising 8.4 percent year-over-year after 2.7 percent in December 2020, driven in large part by stronger shipments to China, according to Oxford Economics. While part of the year-on-year increase reflects base effects, the solid print nevertheless supports our view that the export outlook for 2021 is improving.

The near term will remain challenging, while the coronavirus pandemic continues to disrupt demand and the car sector struggles against chip shortages. Still, we expect exports to hold up as demand from China remains strong and U.S. President Biden’s fiscal plans should boost shipments to the United States.

In nominal terms, goods exports increased 6.4 percent year-over-year in January, up from 2 percent in December 2020. This was driven in large part by better shipments to China, which rose 37.5 percent year-over-year after 10.2 percent a month earlier. But we caution against taking the strong reading at face value, as