TOKYO -- China has topped the U.S. as the leading destination for Japanese goods for the first time since fiscal 2011, as a burgeoning market for advanced technologies drives demand for chipmaking equipment in the world's second-largest economy.
Japan's exports to China were valued at a record 15.187 trillion yen ($141 billion) in the year ended March 31, or 18.3% more than in fiscal 2016, according to Ministry of Finance trade statistics released Wednesday. U.S.-bound exports grew 7.5% to 15.181 trillion yen.
China-bound exports of semiconductor equipment surged nearly 50%. Investment in such equipment is on the rise, according to Ryutaro Kono of BNP Paribas, as the country pushes its "Made in China 2025" initiative to kick-start advanced manufacturing. Exports of metal processing machinery jumped nearly 70% as rising labor costs in China pushed companies to cut back on staff.
Brisk sales to China of industrial robots, control devices and other equipment led Japan's Fanuc to upgrade its fiscal 2017 earnings forecast three times during the year. Makers of semiconductor equipment are racing to keep up with demand: a manufacturing and development unit of Tokyo Electron plans to roughly double production capacity by October.
Japan's overall exports were worth 79.22 trillion yen in fiscal 2017, the highest figure since fiscal 2007's record total. Compared with that year, U.S-bound exports are down 8.5%, while those heading to China are up 16.4%, signifying a fundamental shift in the flow of Japanese goods abroad.
China and the U.S. have switched places in Japan's export charts several times over the past decade. The Asian economic powerhouse was the top importer of Japanese goods from fiscal 2009 to fiscal 2011, as the U.S. struggled to recover from the 2008 financial crash and ensuing global crisis. The Chinese government's 4 trillion yuan (around $586 billion at the time) stimulus package largely shielded its economy from the crisis, creating new demand at home even as overseas economies stumbled.
In fiscal 2012, the U.S. made its comeback. China's economic growth slowed during that year, and tensions with Japan over Tokyo's nationalization of the Senkaku Islands, which China claims as the Diaoyu, bled over to the trade sector.
Now, both the U.S. and Chinese economies are on solid footing. That China is once again Japan's leading export market signifies the nation's growing importance to Japanese business overall. "Exporters will need to do even more to determine what China wants, considering its economy is poised to keep growing," said Yoshimasa Maruyama of SMBC Nikko Securities.
Yet protectionist American trade policies and resulting friction with China could bring fresh twists. If China exports less to the U.S., Chinese factories would grow less eager to invest in facilities and equipment, dampening the country's appetite for Japanese machinery and industrial robots. And if the U.S. economy also falters, Japan would face weakness in its two top export markets.
There are already signs of trouble. Japan's exports increased just 2.1% to 7.38 trillion yen in March, and those for the January-March period slipped below the previous quarter's total. Foreign demand is thought to have contributed almost nothing to gross domestic product growth in the first quarter of 2018.