The steep drop in steel prices and other commodities is taking a toll on the Japan's exports. The foreign trade of Japan is severely affected with slump in global commodities market, with imports falling to 18.0 percent. 

The total exports of Japan dropped to 12.9 percent on the year in January to Yen 5.35 trillion ($47.12 billion), according to the latest data from the Finance Ministry.  The commodities account for a quarter of the world's third largest economy's exports. The country's exports in volume and value fell 9.1 percent and 4.1 percent respectively, for the fourth consecutive time. 

Nikkei Asian Review reports that the sluggish commodity markets in emerging nations are the major reason for the drop in Japanese exports. Its iron and steel exports fell drastically in value and price by 31.3 percent and 25.8 percent, respectively, due to the oversupply situation in China.

Hot-rolled coil was priced at $280 per ton in Asia in January and this was 40 percent lower from a year earlier. Similarly, steelmakers' earnings dropped as well.

Nippon Steel & Sumitomo Metal see tough phase ahead of steel prices. The bleak situation is not different for other commodities exports. The prices of non-ferrous metals fell by over 20 percent in January alone. Very few forecast demand from China and other emerging markets to gain the momentum soon.

Giving a setback to the Prime Minister Shinzo Abe's reforms, Japan's economy contracted in fourth quarter of 2015. Japan's economy fell 0.4 percent during October-December quarter from the third quarter. The drop in demand from the domestic market further impacted the gross domestic product (GDP) of Japan. The economy, on an annual basis, fell 1.4 percent as against the previous fall of 1.2 percent, according toBBC.

Apart from commodities, exports of semiconductors and other electronic components eased 11.2 percent in January. The global smart phone market is growing at slower pace, while demand for personal computers continues to be sluggish. Adding to this, the cut in production of Apple's newest iPhone during the first quarter of 2016 is likely to impact further. 

Asia Times further adds that Japan recorded trade deficit following the drop in exports to China. Japan's exports to other markets also dropped as 5.3 percent fall in shipments to the US and 3.6 percent fall in EU-bound exports. The fourth quarter drop was second quarterly fall in 2015. Japan's imports too fell 18 percent in the wake of lower prices of oil and gas.

The total recovery in demand for liquid crystal displays (LCD) is not expected until the July-September quarter. Meanwhile, automobile exports has aso marginally went down to 1.1 percent in value, with an Asia-bound automobile exports decline of 10.9 percent and 10 percent for the US-bound exports.

Japan's domestic market witnessed worse situation. However, North American market continues to be major market for the automobile majors. Honda is hoping to double its exports to the US this year.