Japan's record economic growth faces shaky outlook

Nikkei -- May 29

Japan's economic expansion dating to December 2012 remains intact thanks to wholly unexpected growth in the first quarter, but mounting headwinds have pushed the economy onto unsteady footing.

Real gross domestic product grew 2.1% on an annualized basis during the January-March period, according to preliminary figures released last week. But the Cabinet Office reported that business conditions for March were "worsening" -- the first time in six years such an economic assessment has come down.

A troubling pattern can be seen at two of Japan's main ports. Exports from the Port of Osaka have dipped below year-earlier figures for six straight months through April. The Port of Yokohama's losing streak has lasted five months so far. The purchasing managers' index, or PMI, also indicates a worsening environment for exports.

The two ports are known for exporting semiconductor production equipment and components. The main reason for the poor performance stems from China. Demand for smartphones has ebbed, and the semiconductor market has been in correction mode since the second half of last year.

Capital spending has dried up for chips installed into the latest smartphones, and the effect has rippled throughout the industry. Since the end of 2018, "Chinese semiconductor makers and others have requested extensions on bids," said Nobuyoshi Suda, executive officer at Organo, a Tokyo-based producer of equipment used to clean semiconductors.