Export growth slowed for the fifth straight month in July as slowing global demand and a strong yen erode a key driver of the economy, government data showed Wednesday.
The deceleration poses a major risk for the export-driven recovery. With lackluster demand at home, Japan has depended on high-growth countries, particularly China, to fuel its sluggish economy.
That expansion is now waning just as exporters face a new onslaught from the yen, which hit a fresh 15-year high against the dollar this week. It weakened slightly Wednesday amid speculation that monetary authorities might intervene in the currency market for the first time since March 2004 to stem the rise.
An appreciating yen is toxic for exporters like Toyota Motor Corp. and Sony Corp. because it shrinks the value of repatriated profits and makes their products less competitive overseas.
“When it is needed, we must respond with appropriate measures,” Finance Minister Yoshihiko Noda said, adding he hoped to work closely with the Bank of Japan.
Growing political pressure could also prompt the BOJ to further ease monetary policy to try to weaken the yen. Economists say the bank may decide to boost liquidity by expanding its three-month low-interest loan program for financial institutions.
The BOJ Policy Board’s next meeting begins Sept. 6.
The Finance Ministry’s latest figures show the value of exports climbed 23.5 percent from a year earlier to ¥5.98 trillion. Exports had expanded by 27.7 percent in June and by 32.1 percent in May.
The strong yen is responsible for much of the export slowdown, said Kyohei Morita, chief economist at Barclays Capital Japan, in a note to clients.
The economy grew at an annualized pace of just 0.4 percent in the April-June quarter, losing its place to China as the world’s No. 2 economy. Prime Minister Naoto Kan is expected to craft a new stimulus package and has asked ministry heads to offer ideas.
Exports to China rose 22.7 percent in July, while those to the U.S. were up 25.9 percent. Shipments to the European Union expanded 13.3 percent.
Demand for machinery jumped more than 53 percent, and motor vehicle exports rose 27.1 percent.
Imports in July rose 15.7 percent to ¥5.18 trillion, resulting in a trade surplus of ¥804.2 billion.
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