Increase in demand set to boost bilateral trade with Japan

Investment still faces tough going due to disputes, say experts

Although trade between China and Japan is likely to decline in the fourth quarter of this year, the pace of contraction may ease, experts say.

"China-Japan economic ties are now at a phase of gradually coming off the bottom and the fall in bilateral trade is likely to slow before the end of the year, mainly owing to sharply contracted trade figures in the same period last year following territorial rows," Yao Haitian, a researcher from the Institute of Japanese Studies at the Chinese Academy of Social Sciences, says.

"The impact from strained ties continues to hurt bilateral trade but some demand is recovering in the two markets. However, demand will never regain its position in the Chinese market because some domestic buyers explicitly refuse to purchase Japanese brands," Yao says.

China is growing into the world's largest consumer market and the world's largest trader. The country's imports over the next five years are expected to total $10 trillion.

In the January-September period of this year, Japan was China's fifth-largest trading partner with bilateral trade reaching $229.08 billion, down 7.9 percent from a year earlier, while China's overall trade rose 7.7 percent. China's exports to Japan went down 2.8 percent year-on-year in the same period to $103.91 billion, according to the General Administration of Customs.

Zheng Yuesheng, spokesman of the customs department, said on Oct 12 that China-Japan trade "showed signs of improvement since the second half of this year" and the monthly trade value narrowed the declining trend for three straight months since July. Meanwhile, China's exports to Japan in September rose 1.5 percent year-on-year, which ended the 14-month decline since July 2012.

Data from Japan's Ministry of Finance show that Japan's exports to China in September climbed 11.4 percent from a year earlier after increasing 15.8 percent in August, while its shipments to the United States rose 18.8 percent following a 20.6 percent gain in the previous month. Export growth to the European Union eased to 14.3 percent from 18 percent during the same period.

Despite the weakened yen, Japan's merchandise trade balance showed a deficit of 932.1 billion yen ($9.5 billion), marking a record 15th consecutive month of trade deficits.

Japan's exports in September increased 11.5 percent from a year earlier, the weakest pace in three months, while imports expanded 16.5 percent, the ministry said in a preliminary report.

"Japan's huge imports of energy products were the major reason for the country's trade deficit because nuclear reactors, which once supplied one-third of the country's power, were shut down after the 2011 Fukushima crisis and a weaker currency increased import costs," Yao says.

Zhang Jianping, a researcher from the Institute for International Economic Research under the National Development and Reform Commission, added that the weak yen helped boost Japan's exports in the short term but the effects of Japan's Prime Minister Shinzo Abe's stimulus measures are ebbing in the medium and long term.

The currency has been under pressure since Abe introduced a monetary easing plan in April. The country's economy grew an annualized 3.8 percent in the second quarter of this year.

But the growth is expected to confront headwinds as the Japanese government pressed ahead with a consumption-tax increase, which is crucial to shrinking the huge national debt.

"The ultimate driving force for Japan's economic growth comes from demand from overseas markets, especially China and the US," Zhang says. "China is a very important market for Japan and Japan's dependence on the Chinese market is increasing while Chinese exports' dependence on the Japanese market has decreased in recent years."

Yao added that the strained ties will continue to constrain bilateral trade and mutual investment.

Japan's non-financial investment in China edged up 5.62 percent from a year earlier in the first nine months of this year, compared with the 16.3-percent growth last year, according to the Ministry of Commerce.

lijiabao@chinadaily.com.cn