Japan’s exports fell for the first time in three months, indicating that the yen’s appreciation and the financial turmoil in Europe are slowing the recovery from the disasters in March.
Shipments dropped 3.7 percent in October from a year earlier, the Finance Ministry said Monday, worse than all 29 estimates stated by economists surveyed by Bloomberg News.
Exports to China, Japan’s biggest market, slid 7.7 percent, the largest drop since May. Weakening overseas demand has led companies including Toshiba Corp. and Nippon Yusen K.K. to call on the government to follow up on last month’s yen intervention with steps to prevent the currency from appreciating further.
“A sharp slowdown in demand from eurozone countries should be weakening exports from Asia, in turn leading to weakness in exports from Japan,” said Masayuki Kichikawa, chief economist at Bank of America Merrill Lynch in Tokyo. “Exports should be weakening toward the end of this year, or possibly until January or February.”
The Bank of Japan last week cut its economic assessment, saying the economy is picking up at a “more moderate” pace. BOJ Gov. Masaaki Shirakawa said that “developments in Europe’s sovereign-debt problems are the largest risk now.”
Exports slid 3.5 percent on a seasonally adjusted basis from September, Monday’s report by the Finance Ministry said.
From a year ago, imports climbed 17.9 percent on increased demand for food and energy.
The euro region, Japan’s third-biggest export market after the U.S. and China, is embroiled in a debt crisis. Ten-year Italian and Spanish government bond yields are hovering around the 7 percent threshold that led Greece, Portugal and Ireland to seek bailouts.
The turmoil has boosted the yen’s appeal as a safe haven, driving up the currency against the dollar and euro.
Japan intervened Oct. 31 in the foreign-exchange market for the third time this year as the yen rose to 75.35 per dollar, the highest since World War II. Finance Minister Jun Azumi said the sales were conducted to protect the economy and prevent excessive moves in the currency.
The government has also pledged to help companies cope with the stronger yen by extending loans to facilitate overseas acquisitions and corporate subsidies to prevent jobs and factories from moving overseas.
Further evidence that Japan’s industrial base is hollowing out came with the South Korean state-run Korea Development Bank saying last Thursday that Japanese companies will increase takeovers on the peninsula to take advantage of the strong yen. The Korea Development Bank earlier this year arranged Toshiba Corp.’s $35 million investment in South Korean wind turbine maker Unison Co.
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