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Japan’s freight industry sluggish in second half of 2019

Pictured: Himeji Castle, a 1333-built Japanese castle located in the town of Himeji, about 30 miles west-north-west of Kobe, Japan. Photo: public domain / Reggaeman / Wikimedia Commons

Japan’s freight industry is set for a downturn on the back of declining economies in the U.S., China and the Eurozone, reads a new outlook from Nittsu Research Institute and Consulting of Tokyo.

Total Japanese domestic freight volumes are expected to decline, according to Nittsu Research, as both consumption- and production-related freight volumes will fall while construction volumes will remain “small.”

Consumption, production and construction freight demand

Consumption-related freight will likely fall as personal consumption has been “sluggish” and a continued negative trend is forecast.

Production-related freight is subject to a slowdown owing to declining business investment and a decrease in industrial production. Volumes of general machinery had been steady but other areas, such as vehicles, automotive parts, steel and chemical products, were “sluggish.”

Construction-related freight is also forecast to stay on a continuing negative trend. Although there is public investment, large-scale civil engineering works are not expected and there is low demand for residential construction. Construction freight demand is forecast to be low.

Meanwhile, coastal shipping is also expected to be “sluggish” and so is domestic aviation freight; domestic airlines are said to be in a “state of stagnation.” Rail freight transport, however, has increased, although this was partly due to the effect of being depressed by previous natural disasters.

International cargo volumes

International cargo volumes continue to decline, Nittsu Research said, due in part to the trade war between the U.S. and China, along with a slowing Chinese economy. Sales to the U.S. are, however, strong. Imports to Japan are, essentially, flat and are not forecast to increase by much — by less than 1%. There is only low demand for consumer goods and a recent consumption tax has reduced that demand. Business investment has slowed too, Nittsu Research said.

The story’s not much better on the air freight front. Japanese air freight exports have plummeted by 17.2% on the Japan-Asia and Japan-Europe routes. Japan-Pacific routes also fell. Japan-Asia is not expected to increase by the end of the year, owing to the slowdown in the Chinese economy and the ongoing trade friction between Beijing and Washington.

Air freight imports into Japan also fell by 2.7%. A lack of consumer enthusiasm for consumer goods seems to be the root cause and an increase is not expected. A pickup in consumer activity was hoped for prior to the introduction of the consumption tax, however, Nittsu described it as “lacking in excitement.”

Survey of corporate logistics: down, down, down

Nittsu’s survey of corporate logistics makes for depressing reading. In every possible way, every possible index is heading one way: down. The domestic shipment load movement index for the final quarter of the year is forecast to decline across a whole series of industries.

The Usage Trend Index for the transportation sector, which forecasts out to the end of December, is forecast to be negative. The import/export cargo volume load movement index for the final quarter is forecast to be negative and all transportation “agencies” are “expected to deteriorate.”

Meanwhile, inventory volumes and warehouse storage volumes are forecast to decline to the end of 2019. All raw material inventories are forecast to fall to the end of the year.

Japanese economy was essentially flat

Japan’s economy was essentially flat in the second quarter with, as Nittsu reports, a 0.3% growth when compared to the same period. Leisure-related travel, particularly outdoors leisure (such as hiking and camping), have helped drive growth.

Japanese government spending has also increased, but private consumption is forecast to be down in the second half owing to the imposition of a consumption tax. Business investment is expected to be firm, owing to investment in automation, Nittsu indicated. Meanwhile, housing demand will likely be lower than expected. And, as indicated above, imports and exports are being burdened by the global economic slowdown.

“The economy is at a crucial moment,” Nittsu concluded.

Insight: Japan’s secular market trends

FreightWaves spoke to David Jacobs, CEO of the Australia Japan Business Co-operation Committee. Commenting on the general business environment in Japan, Jacobs pointed out that Japan is facing the problem of an increasingly elderly population.

Jacob told FreightWaves that the market in Japan, particularly the consumer market, will likely continue to decline.

He added that Japanese businesses have been working out the effects of the bubble economy from more than 30 years ago and have been shoring up their balance sheets.

“They are sitting on wads of cash,” he said, adding that Japanese businesses are seeking to invest overseas. He further added that Japanese manufacturers have been moving out of Japan and relocating to Southeast Asia.

Japan’s domestic freight volumes

Total transport
Coastal cargo
Domestic air
cargo volumes
2017 4,784.4 360.1 0.904
2018 4,727.4 354.4 0.823
2019 (estimate) 4,677.8 342.2 0.787

Units: Millions of metric tonnes.
Note: one metric tonne equals 1.10231 U.S. short tons
Source: Nittsu Research Institute and Consulting.

Japan’s foreign trade container cargo (TEU) transportation volumes

2017 2018 2019
Total 12,466 12,694 12,566
Exports 5,100 5,184 5,044
Imports 7,365 7,510 7,522

Units: Thousands of twenty-foot equivalent unit ocean shipping containers
Note: Table is based on data from eight major box-handling seaports in Japan: Tokyo, Yokohama, Shimizu, Nagoya, Yokkaichi, Osaka, Kobe and Hakata. These eight ports account for 85.5% of non-Japanese containerized exports and 85.1% of non-Japanese containerized imports.
Source: Nittsu Research Institute and Consulting