JAPAN’S exports in December fell the most in more than two years, dragged by plummeting shipments to China and regional markets as weak global demand and U.S.-Sino trade frictions take their toll on the trade-reliant economy.

Exports in December fell 3.8 percent from a year earlier, Ministry of Finance (MOF) data showed yesterday, bigger than a 1.9 percent drop expected by economists in a Reuters poll. It was the sharpest year-on-year decline since October 2016.

The trade data underscore rising external pressure on the world’s third-largest economy and comes hours before the Bank of Japan delivers its policy decision at a two-day meeting ending later in the day.

With inflation stubbornly weak and global economic momentum cooling, the central bank is widely expected to maintain its massive monetary stimulus.

Soft exports will likely dent Japan’s economy over the coming quarters, already feeling the strain from a slowdown in China, a major market for its key manufacturers who ship equipment and supplies used by Chinese manufacturers of semiconductors, mobile phones and other goods.

“Net trade should have remained a drag on GDP growth in the fourth quarter,” Marcel Thieliant, senior Japan economist at Capital Economics, wrote in a report. “We think it will remain weak this year.”

The pressure on output at home looks set to rise, with data this week showing China’s economy struggling to shake off the effects of a trade war with the United States, sending 2018 growth to the lowest in 28 years. The International Monetary Fund has also trimmed its global growth forecasts.

Exports to China, Japan’s biggest trading partner, fell 7 percent in the year to December, the data showed. With the Sino-U.S. trade war already rippling through global supply chains, the worry is that a severe disruption could drive down corporate profits in Japan and other countries, and tip major economies into sharp downturns.

China’s slowdown has also hit South Korea’s quarterly exports, data showed Tuesday.

A Reuters poll of economists showed the heightened external pressures have increased the chances of Japan sliding into a recession this coming fiscal year starting in April.

Japan’s shipments to Asia, which account for more than half of overall exports, fell 6.9 percent in December.

(SD-Agencies)