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Japan Exports Tumble 10% As Maehara Presses BOJ To Ease: Economy
Perspective | 25 October 2012

Japan’s exports fell the most since the aftermath of last year’s earthquake as a global slowdown, the yen’s strength and a dispute with China increase the odds of a contraction in the world’s third-largest economy.

Shipments slid 10.3 percent in September from a year earlier, leaving a trade deficit of 558.6 billion yen (US$7 billion), the Finance Ministry said in Tokyo. The median forecast in a Bloomberg News survey of analysts was for a 9.9 percent export decline. Imports rose 4.1 percent.

Economy Minister Seiji Maehara pressed the Bank of Japan for more action, saying the nation is “falling behind” in monetary stimulus and faces the threat of another credit-rating downgrade. Taiwan reported that unemployment rose to a one-year high, underscoring weakness across Asia after China’s third-quarter growth was the slowest since 2009.

“There’s a high chance that Japan’s economy will have two consecutive quarters of contraction through December,” said Yoshimasa Maruyama, chief economist at Itochu Corporation in Tokyo. “The slump in advanced nations is spreading to emerging economies.”

The decline in shipments, exacerbated by a spat with China over islands in the East China Sea, was the biggest since May last year, when the country was rebuilding supply chains wrecked in the March earthquake and tsunami.

China, Europe
Shipments to China, the nation’s largest export market, fell 14.1 percent from a year earlier. Exports to the European Union fell 21.1 percent, while those to the US rose 0.9 percent. Auto shipments to all markets dropped 14.6 percent.

In a speech in Tokyo, Bank of Japan (BOJ) Governor Masaaki Shirakawa vowed to conduct “seamless” monetary easing as he said the Japanese economy is “leveling off.”

Earlier this month, the International Monetary Fund’s Deputy Managing Director Naoyuki Shinohara said in an interview that the BOJ has room to ease further, adding international weight to calls for more action by the central bank.

Paul Sheard, chief global economist at ratings company Standard & Poor’s, said this month that the BOJ’s balance sheet has increased by about 36 percent since August 2008, compared with about 209 percent for the US Federal Reserve and about 329 percent for the Bank of England. JPMorgan Securities Japan Co and UBS AG expect the central bank to add to easing at board meeting on 30 October.

Taiwan Jobless
Taiwan’s unemployment rate increased to 4.3 percent in September, the statistics bureau said in Taipei. In Australia, the government announced spending cuts to help deliver a budget surplus.

Toyota Motor Corporation and Nissan Motor Co, Japan’s two largest carmakers, reported their steepest drops in China sales since at least 2008 in September, as data showed that Japan’s auto exports to the country fell 44.5 percent.

The territorial dispute will knock 0.8 percentage point off Japan’s gross domestic product in the October to December period, JPMorgan said on 6 October. The brokerage, along with Morgan Stanley and Citigroup Inc, expects the economy to contract in the third and fourth quarters of this year.

Import Gains
The trade deficit compared with economists’ median estimate of a 547.9 billion yen shortfall. The rise in imports was higher than a 2.9 percent gain estimated by economists, as the country bought more oil and liquefied natural gas.

“The reason behind the increase is very simple,” said Shohei Setoh, a Tokyo-based manager for a crude oil trading group at JX Nippon Oil & Energy Corporation. “Everyone rushed to pass customs,’’ before a tax increase on oil imports that began 1 October.

The government said it would draw up spending measures to counter a slowdown. A yen around 5 percent from last year’s postwar high of 75.35 against the dollar is hurting manufacturers such as Sony Corporation, making exports more expensive and reducing the value of repatriated earnings.

Japan’s government this month cut its economic assessment for a third straight month, the longest streak since the 2009 global recession. Data earlier this month showed falling machinery orders and shrinking factory capacity use in August. The International Monetary Fund forecasts the world economy will grow this year at its weakest pace since 2009, saying 9 October there are “alarmingly high” risks of a steeper slowdown.

Public support for Prime Minister Yoshihiko Noda fell to 18 percent, the lowest level since he took office in September 2011, the Asahi Newspaper reported in Tokyo, citing a survey dated 20 to 21 October.


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