Because the dispute between China and Japan over the Senkaku islands in East China Sea, many people have concerned about regional trade activities. Daiwa Institute of Research recently announced a report saying the dispute is likely to reduce Japan's exports to China this year by about 1 trillion yen ($12.8 billion).
However, Japanese exports to China has decreased from a year ago level since 2Q 2011. Accumulated amounts in the first eight months in this year fell 9.2% from the same period a year earlier. Japan's exports to China in 2012 are likely to loose more than 1 trillion yen from the previous year even if there is no friction.
If Daiwa Institute predicts that the disputes cause another 1 trillion yen of reduction adding to the original decrease over the past year, Japan's exports to China will fall 16% from a year ago in 2012.
Japan is mainly exporting materials, parts and machineries to China to support Chinese industrial activities. Therefore, the 16% decrease of supply from Japan will cause significant limitation over Chinese manufacturing.
China seems to try to hide its rapid decrease of demand for materials and machineries using the friction with Japan.
The below chart shows the monthly year-on-year changes of China's energy demand and Japan's exports to China.
Growth of petroleum demand has been sluggish since the latter half of last year, and growth of electricity demand has been approaching to zero.
Since the slowdown of energy consumption represents sluggish manufacturing activities, demand for Japanese materials and parts is also declining.
The apparent oil demand, which is thought as the Chinese domestic pure demand calculated by Platts, shows more clear tendency of lowered growth of Chinese petroleum demand.
China's crude oil imports seemed to keep upward trend until mid-2012, but the import figures in the first half of this year contained stockpile for the newly build 80 million barrels of strategic reserve facilities.
Then, imports in July and August decreased apparently, and suggest fewer crude oil processing in the following months.
Even if both nations didn't have frictions, Japan's exports to China could have been likely to drop sharply after September.