Japan's Economic and Freight Outlook and Short-term Freight Movement Survey in Japan (Part 2)
Published: 18/09/20
Nittsu Research Institute and Consulting, lnc. (NRIC), one of the subsidiaries of Nippon Express, publishes "Japan's Economic and Freight Outlook" and "Short-term Freight Movement Survey in Japan (Nittsu Soken Tan-kan)" quarterly.
Coastal shipping freight
Freight transport by coastal shipping is expected to decline further by 6.6% in FY2020. Both production-related cargo and construction-related cargo are expected to be sluggish in FY2020, for a total of seven consecutive years of decrease.
Due to self-restraint in economic activities, demand for petroleum products will fall significantly and thus production-related cargo will inevitably expand its negative range in FY2020. Steel and chemical products are expected to be weak due to the downstream demand decline.
Construction-related cargo will drop to less than 6% in FY2020. The execution of large-scale public civil engineering works cannot be expected, and a decrease is expected especially in cement, gravel, and sand.
Domestic airfreight
In FY2020, suspensions and reductions in flights have occurred one after another, resulting in a significant reduction in domestic airfreight. In April and May 2020, the volume of airfreight was halved because of self-restraint from going out due to the Corona shock. It seems hard to break out of the shrink in demand within the year. Positive reversal will be expected from January to March 2021.
Table1: Outlook for domestic freight transport of Japan
International freight transport from/to Japan
Foreign trade ocean container freight
Exports by foreign trade ocean containers in FY2020 are expected to decline by 6.6% for the second consecutive year of decline. As the growth of the COVID-19 declines and economic activities resumes with economic measures of each country, the slowdown in the global economy growth will subside in the second half of the year, but negative growth for the second consecutive year will be inevitable. By commodity, the momentum of overseas capital investment demand recovery is weak, and industrial machinery, machine tools, and other machinery continue to show sluggish cargo movements. Delays in the recovery of production at overseas factories are another factor in pushing down the growth. With regard to automobile parts, although it is expected that they will be supported by medium to long-term demand related to EV (electric vehicle) shift and electrical equipment, the global automobile market remains stagnant, and recovery within the fiscal year cannot be expected. There is a possibility that the recovery will be delayed, and the negative range will further expand due to the US-China trade friction and second COVID-19 outbreak, etc.).
Imports by foreign trade containers in FY2020 are expected to fall by 4.8%. Regarding consumer goods such as food and clothing, slack cargo movements continues due to low personal consumption. In the first half of the year, a decline is inevitable due to the reactionary decrease in demand before the consumption tax hike in 2019. As for production goods, capital investment will continue to fall below the previous year's level, and shipments of production parts and materials and machinery will stagnate. There are also downward pressures due to the return of production bases to Japan and increased domestic procurement of parts and materials. The import of both production and consumer goods will remain sluggish throughout the year.
Table2: Outlook for foreign trade ocean container freight of Japan
International airfreight
Exports by international air transport in FY 2020 are expected to decline by 9.0%. The mainstay Asian line is recovering clearly due to the early settling down of COVID-19. The Pacific and European lines are greatly affected by the Corona shock and lack the recovery momentum compared to the Asian line. As for semiconductor-related cargo (electronic parts and manufacturing equipment), the full-scale recovery of cargo movements will be expected due to the increased demand for AI, IoT, and 5G. Regarding automobile parts, demand for EV shifts and electrification will increase, but recovery within the year seems uncertain. As for general machinery and mechanical parts, overseas capital investment demand is slow to recover, expectations are low. In the second half of the year, although economic recovery, passenger flight recovery in each country, and a reactionary increase from the Corona shock are expected, the negative figures in the first half cannot be compensated. The level for the entire year falls below the previous year's level. There is a possibility that the recovery will be delayed, and the negative range will further expand due to the US-China trade friction and second COVID-19 outbreak, etc.
Imports by international air transport in FY2020 are expected to fall by 7.2%. Regarding consumer goods, stagnant cargo movements will continue as personal consumption continue to fall below the previous year's level. Despite the reduction of import tariffs following the trade agreement, import volume increase from point return campaign of cashless payment and 100,000 yen benefit from the government is not much expected. With regard to production goods, the recovery in business fixed investment, mainly of export companies, has slowed, and is below the level of the previous year. The return to domestic production bases to mitigate the dependence on China, and the increase in domestic procurement of parts and materials are also factors that are pushing down the growth of import by air.
Table3: Outlook for international airfreight of Japan
Trends in domestic shipment volume (cargo movement index)
The "cargo movement index" in the April-June 2020 results (expected) dropped significantly to minus 65, reaching the lowest level since January-March 2009 (-75) just after the Lehman Brothers crisis. The index decreased by 27 points from the previous term (January-March 2020). The index for the July-September 2020 forecast is minus 62, increased by 3 points from the previous term (April-June 2020).
Graph1: Results and prospects for domestic shipment volume
Changes in the "Cargo Movement Index" (2016-2020)
Since July-September 2016, the cargo movement index has started to gradually increase, and in July-September 2017, it became positive for the first time in 14 years. In October-December 2017, the result was an even higher increase.
After falling in January-March 2018 and April-June 2018, the index increased again in July-September 2018 and October-December 2018, indicating a "business peak".
A sharp decrease of 17 points in the January-March 2019 results and 7 points in the April-June 2019 results suggest a deterioration in the economy. Although it recovered 1 point in the July-September 2019 results, it decreased again in the October-December 2019 results due to the effect of the consumption tax hike, and further decreased in the January-March 2020 results.
In the April-June 2020 results, the impact of the Corona shock was severely affected, resulting in a significant decline in the index. It was the lowest level after January-March 2009 (-75) after the Lehman Brothers crisis.
Graph2: Changes in the "Cargo Movement Index" (2016-2020)
"Cargo movement index" by industry (15 industries)
The domestic shipment volume by industry was negative for all 15 industries in the April-June 2020 results (expected) and the July-September 2020 outlook. The minus was smallest in the food and beverage manufacturing industry, which was -25 in the April-June results and -31 in the July-September outlook. In particular, 28% of respondents answered "increase" in April-June results, which shows a demand increase for food beverage even in the midst of the COVID-19 outbreak. The largest negative figure was in the lumber and furniture manufacturing industry, which was -97 in the April-June results (expected) and -81 in the July-September outlook.
The outlook for July-September 2020 is expected to be negative in all industries, but compared to the actual results in April-June, the negative range is improved in 10 industries such as other manufacturing, lumber/furniture, and chemical/plastics, etc.
Graph3: Cargo movement index by industry
Table4: Results and prospects for domestic shipment volume by industry
Source: www.nipponexpress.com
