Exports at three-year low as recession nears

EU debt crisis, Senkaku row hurt producers

Bloomberg

Japan is suffering its worst year for exports since the 2009 global contraction as Europe’s debt crisis, China’s economic slowdown and the Senkakus dispute with Beijing hurt manufacturers and deepen the risk of a recession.

Shipments totaled ¥53.5 trillion for January through October, down 2.3 percent from the same period last year, according to data released Wednesday by the Finance Ministry. The trade deficit for 2012 so far stands at a record ¥5.3 trillion.

The hollowing out of Japan’s export champions, highlighted by a cut in Panasonic Corp.’s debt rating to one step above junk status by Moody’s Investors Service on Tuesday, underscores the urgency of rekindling domestic demand. Ahead of the Dec. 16 general election, political parties are facing off on how hard to press the Bank of Japan to boost stimulus.

“There’s no doubt that the economy is already in a recession,” said Kiichi Murashima, chief economist at Citigroup Inc. in Tokyo. “Political pressure for further monetary easing is building, and we expect the BOJ to take additional measures in January.”

Exports in October fell for a fifth month, down 6.5 percent from a year earlier and leaving a trade deficit of ¥549 billion, the Finance Ministry reported. That compared with the median forecast of 25 economists for a 4.9 percent decline.

Shipments to China, Japan’s largest export market, fell 11.6 percent as the sovereignty row over the Senkaku Islands in the East China Sea takes its toll on the $340 billion trade relationship between Asia’s two biggest economies. Exports to the European Union meanwhile fell 20.1 percent on year, while those to the United States were up 3.1 percent.

Vehicle exports to China fell 82 percent on year, the largest monthly drop since October 2001, the Finance Ministry said. Toyota Motor Corp. said October deliveries in China declined 44 percent from a year earlier, and Nissan Motor Co. cut its full-year profit forecast by 20 percent.

“The slump in exports will probably continue this quarter,” said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance Co. in Tokyo. “China’s economy probably hit bottom in the July-September period, but its recovery may be limited this quarter and there’s no sign that Chinese consumers will stop boycotting Japanese cars.”

Japan’s exports in the first 10 months of the year are at their lowest level in the reporting period since 2009, including 2011, when the March 11 earthquake-tsunami disaster and heavy flooding in Thailand crimped production at Japanese manufacturers. While the yen is at a seven-month low, it is still more than 30 percent higher than five years ago, hurting exporters’ profits.

The economy will probably slide into recession this quarter on weakness in domestic consumption and the decline in exports, which account for about 15 percent of overall economic output.

Gross domestic product shrank an annualized 3.5 percent last quarter, and the economy may contract a further 0.4 percent in the final three months of this year, the third technical recession since 2008, according to a Bloomberg News survey of economists. Recessions in Japan are officially defined by a government-charged panel that considers data beyond figures for gross domestic product.