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NEWS UPDATES Asean Affairs        21  March 2011

Indo exports to Japan should drop, but rebound

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As the economic aftershock of the disaster in Japan rolls through the region, the government has forecast a drop in exports to the country, one of its top trading partners.

“Exports to Japan will decline in the next three to four months as it focuses on recovery,” Mahendra Siregar, the deputy trade minister, said on Saturday. “However, we may see a jump in the second half as they will look to replace damaged goods.”

Mahendra recalled the impact of the Kobe earthquake in 1995, saying Japan would recover and, in turn, help Indonesia’s exports to the country rebound.

“During the Kobe earthquake, Japan’s imports weakened for around six months, and at that time as much as 20 percent of our exports went to Japan,” he said. “Now, we are less dependent on Japan. Even though Japan was still our main export destination last year, the percentage of exports had dropped to 13 percent.

“There’s no need for Indonesian industries to overreact in assessing Japan’s earthquake, and there’s no need to look for alternative markets. They have been through this before and managed to recover. I think we should focus on how we will meet rising demand [after Japan’s recovery].”

Mahendra expressed hope that Japan would recover soon. If its economy slowed too much this year, he said, it would have a considerable impact on its investment in Indonesia.

“Japan’s investment in the last five years reached more than $9 billion, of which 38 percent was in the manufacturing sector,” he said. “In the tourism sector, the number of Japanese tourists is around 500,000 people annually, contributing around $70 million.”

Indonesia expects to earn $8.4 billion in tourism revenue this year after making $7.6 billion last year, Tourism Minister Jero Wacik said in December. Foreign tourist arrivals are expected to increase to about 7.7 million this year, from 7 million last year.

According to data from the Central Statistics Agency (BPS), Japan was the biggest destination for Indonesia’s non-oil and gas exports last year and the second-biggest in terms of imports. Exports to Japan were valued at $16.49 billion last year, while imports from the country totaled $16.9 billion.

Indonesia’s total exports last year were valued at $157.7 billion, while imports were $135.6 billion.

Mahendra said imports of capital goods and automotive products would fall because Sendai, one of Japan’s main industrial centers, was among the hardest-hit areas in the disaster.

“Imports of automotive products will be disrupted because Sendai is one of the areas where major manufacturers like Toyota are located,” he said. “Damage sustained at the Fukushima nuclear power plant, which supplies 28 percent of Japan’s electricity, will also reduce Japan’s manufacturing productivity.”

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