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China’s Slowdown Stings Japanese Companies

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By Takashi Nakamichi And Megumi Fujikawa

TOKYO—Japanese companies are beginning to feel the chill from China.

Export volumes from Japan are down and figures released this week showed the nation’s industrial output is slackening. “One major cause is a slowdown in China,” said Takeshi Minami , chief economist at Norinchukin Research Institute.

Mr. Minami and other economists said data so far suggest Japan’s economy might have contracted 1% or so in the second quarter, a sharp reversal after 3.9% annualized growth in the first quarter.

A poor quarter, following a weak performance last year after the nation’s sales tax went up, would cast a shadow over Prime Minister Shinzo Abe ’s economic-revival plans. Japanese corporate profits have surged over the past two years, helped by a weaker yen.

Japanese exports to China fell 4.5% in volume terms in May, the fourth straight month of decline. China is Japan’s second-largest export market after the U.S. and accounts for nearly one-fifth of the total.

Especially hard-hit are Japan’s core industries: autos, steel and semiconductors. Auto exports to China in recent months have been running at roughly half the year-earlier level, and steel exports have fallen for nine straight months. That is despite the fact that Japanese companies are shipping out their exports at the lowest prices since the late 1970s, according to Bank of Japan data.

At Komatsu /zigman2/quotes/205979659/composite KMTUY +4.69% Ltd., one of the world’s biggest manufacturers of construction equipment, sales of hydraulic excavators in China fell more than 40% in both April and May compared with year-earlier levels.

A spokesman for Komatsu said the company sensed caution among customers in China, where excess building and fears of a property bubble have curtailed new real-estate investment.

“Recently, they buy only when there’s an immediate need,” the spokesman said.

Kazuhiro Kashio , the president of watch and electronics maker Casio Computer /zigman2/quotes/206719136/composite CSIOY +4.09% Co., said in an interview Tuesday that the company has recorded strong sales of its digital cameras in China but is cautious about expanding output in the country in part because of fears about the economy. “There’s really a lot of risk in China,” Mr. Kashio said.

China continues to grow: Gross domestic product expanded 7% in the first quarter, a poor showing by Chinese standards but still nearly twice as fast as Japan. Some Japanese companies say they are doing fine.

A spokesman for Murata Manufacturing Co., a Kyoto-based company that makes tiny parts for smartphones, said: “While there have been reports about the slowdown in the Chinese economy, we are seeing steady demand from those switching” to more advanced phones.

Manufacturers aren’t the only Japanese companies with a big stake in China’s economy. Japan’s retail industry has benefited from spending by Chinese visitors. The Mitsukoshi department store in Tokyo’s Ginza district, owned by Isetan Mitsukoshi Holdings /zigman2/quotes/205310354/delayed JP:3099 +5.39% Ltd., posted a 33% gain in total sales for May. Chinese visitors generally account for about half of the Ginza store’s sales to foreigners, according to a spokesman.

So far, Chinese tourism is still surging. Some 387,000 visitors from China traveled to Japan in May, more than double the figure a year earlier, according to the Japan National Tourism Association.

“If a slowing economy begins to affect that trend, the impact wouldn’t be negligible,” said Toshihiro Nagahama , chief economist at the Dai-ichi Life Insurance Research Institute.

Write to Takashi Nakamichi at and Megumi Fujikawa at

US : U.S.: OTC
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JP : Japan: Tokyo
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