Japan Exports Rise Less Than Expected on Market Woes

By Jason Clenfield

Oct. 23 (Bloomberg) -- Japan's exports rose less than economists estimated in September as overseas demand weakened in the wake of a deepening global financial crisis.

Exports, the main engine of economic growth last year, rose 1.5 percent from a year earlier, after rising 0.3 percent in August, the Finance Ministry said today in Tokyo. Economists surveyed by Bloomberg News predicted a 5.1 percent increase.

The Nikkei 225 Stock Average slumped to a five-year low on concern that the global economy will fall into a recession, crippling sales of the country's cars and electronics. Toyota Motor Corp. and Honda Motor Co. may report profit fell last quarter, and NEC Electronics Corp. this week changed its full- year forecast to a loss because of slumping chip demand.

``Export declines are imminent, and Japan's getting deeper into a recession,'' said Junko Nishioka, an economist at RBS Securities Japan Ltd. in Tokyo. ``Consumers around the world can't get money for shopping because of the credit crunch.''

The Nikkei tumbled 6 percent to 8,151.29, the lowest since May 2003, as of 10:27 a.m. in Tokyo. The yen traded at 97.63 per dollar from 97.74 before the report was published, and has gained 8.7 percent this month, adding to exporters' woes.

Japan's government this week acknowledged that the world's second-largest economy has probably entered its first recession in six years. Global stock markets have lost $14 trillion in value since the bankruptcy of Lehman Brothers Holdings Ltd. in September spurred a worldwide financial crisis.

Different World

``The world is a completely different place since Lehman went bankrupt,'' said Kiichi Murashima, chief economist at Nikko Citigroup Ltd. in Tokyo. ``The U.S. is clearly in a full-blown recession and the feedback effects will hit from here.''

Those effects have already started to spill through Europe and Asia, which together account for more than 60 percent of Japan's exports.

European Central Bank President Jean-Claude Trichet this week said the credit freeze and inflation have pushed the euro area into ``in a very, very important growth slowdown.'' China, which in July overtook the U.S. as Japan's biggest export market, grew at its slowest pace in five years last quarter.

Exports to China rose 1.7 percent in September from a year earlier and shipments to Asia climbed 2.9 percent, the Finance Ministry said. Exports to the U.S. dropped 10.9 percent and shipments to Europe fell 9 percent.

Shrinking Surplus

Imports surged 28.8 percent, the fastest pace in more than two years, as energy costs remained higher than a year earlier, even after easing since July. That caused the trade surplus to shrink 94.1 percent to 95.1 billion yen ($973 million). Economists expected the gap to narrow to 574.6 billion yen.

Manufacturers have also been hurt by the yen's appreciation. Japan's currency has risen 10 percent against the dollar and 35 percent versus the euro since August.

Toyota's net income probably dropped 50 percent last quarter, according to five analysts surveyed by Bloomberg News. Honda may say net income slumped 32 percent, analysts said.

NEC Electronics Corp., Japan's third-biggest chipmaker, this week forecast an 8 billion yen loss for the year ending March after earlier saying it would break even.

Companies are also cutting production and hiring plans in anticipation that the financial crisis will stifle demand for Japanese products.

Nissan Motor Co., which makes about 40 percent of its sales in North America, this week joined Toyota and other carmakers in reducing domestic output. The Tokyo-based automaker also said it would fire contract workers, according to the Nikkei newspaper.

To contact the reporter on this story: Jason Clenfield in Tokyo at jclenfield@bloomberg.net