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The earthquake and tsunami that struck Japan in March 2011, and the subsequent nuclear fallout scare, had a devastating effect on the Japanese shipping sector. Industries were hit and landside infrastructure was battered. Over the past quarter the Japanese ports sector has continued its recovery, and BMIs longterm view that there could be upside potential for Japanese facilities in terms of tonnage, if not container throughput, has begun to play out.

Both the countrys container ports, and its container shipping companies, however, are struggling. An excess of tonnage in the global container fleet has led to plummeting rates, while continued economic crises in the West threaten ports throughputs. Japanese shipyards are also beginning to feel the pinch as new-build orders drop.

Headline Industry Data

- Port of Chiba 2012 tonnage throughput forecast to grow 1.0%, with average annual year-on-year (y-o-y) growth of 1.2% during our forecast period to 2016.

- Port of Nagoya 2012 tonnage throughput forecast to grow 4.5%, with average annual y-o-y growth of 4.8% during our forecast period.

- Port of Tokyo 2012 container throughput forecast to grow 3.6%, with average annual y-o-y growth of 4.0% to 2016.

- Port of Yokohama 2012 container throughput forecast to grow 5.7%, with average annual y-o-y growth of 6.0% during our forecast period.

Key Industry Trends

Japanese New Build Orders Dropping, Yards Try To Lure Orders Amid Growing Steel Price Concern

Shipbuilders are feeling the bite from the overcapacity crisis, with lines keeping a close eye on their bottom lines and orders dropping. Japanese export ship orders fell year-on-year (y-o-y) for the fifth consecutive month in September 2011. BMI expects yards to continue trying to lure orders by offering cheap credit and lower prices, and we caution that lines who have not been badly affected by the rates depression may continue to order, with worrying consequences for capacity.

Kobe Container Throughput Up 5.4%

The Japanese port of Kobe recorded a 5.4% increase in container throughput in H111. Some 1.04mn TEUs passed through what is Japans fourth busiest port during the period. Much of the growth was from higher imports, which were up 6.1% compared to a 4.8% growth in exports.

Japanese Shippers Demand Review Of Unfair Tonnage Tax System

The Japanese Shipowners Association (JSA) is demanding that the government review its tonnage tax, claiming it discriminates unfairly against domestic ocean carriers, it was reported in November 2011. The JSA has written to the government listing its demands, and has run a media campaign in leading national newspapers. Japanese-registered vessels make up just 4% of those operated by domestic shipping companies and the JSA is asking that foreign vessels are also taxed.

Key Risks To Outlook

A major risk to our economic outlook comes from another collapse in external demand as was seen in the height of the global financial crisis. This would come at the worst possible time for the economy which is currently suffering from negative domestic demand growth. If both external demand and domestic demand decreased sharply, then the effect on Japans ports and shipping sectors would be highly negative.