Japan's Exports Fell the Most in Almost Seven Years

By Jason Clenfield

Nov. 20 (Bloomberg) -- Japan's exports declined at the fastest pace in almost seven years in October as the intensifying global financial crisis stifled sales of cars and electronics.

Exports, the main engine of Japan's economic growth in the past six years, fell 7.7 percent from a year earlier, the biggest drop since December 2001, the Finance Ministry said today in Tokyo. Economists surveyed by Bloomberg News predicted an 8 percent drop.

The Nikkei 225 Stock Average dropped 4.1 percent on concern exporters' profits will deteriorate as the global slowdown spreads to Asia, where Japan's shipments dropped last month for the first time in six years. Automakers Isuzu Motors Ltd. and Hino Motors Ltd. said today they plan to cut output in response to weaker overseas sales.

``We're in store for even more depressing export news,'' said Kyohei Morita, chief Japan economist at Barclays Capital in Tokyo. ``Exports will heavily weigh on Japan's economy as the impact of the global financial crisis deepens.''

The yen traded at 95.72 per dollar at 12:16 p.m. in Tokyo from 95.88 before the report was published. Japan's currency has advanced 9.2 percent since September, eroding exporters' earnings.

Japan's economy contracted for a second consecutive quarter in the three months ended Sept. 30, following the U.S. and Europe into recessions, as businesses cut spending. Growth in China, Japan's largest trading partner, has slowed for four quarters.

Emerging Markets

Today's report showed the global financial crisis is hurting demand from the emerging markets that have propped up Japan's export growth as the U.S. and Europe falter. Exports to Asia fell 4 percent, the first decline in more than six years. Shipments to China fell for the first time in three years.

Shipments to Europe plunged 17.2 percent, the largest drop since December 2001, and demand from the U.S. dropped 19 percent.

``Exports and capital spending have declined across the board as the outlook for the key European and North American economies has become increasingly gloomy,'' said Naoki Iizuka, senior economist at Mizuho Securities Co. in Tokyo. ``Japan's real gross domestic product will inevitably shrink in the fourth quarter and in the first quarter of next year.''

Imports climbed 7.4 percent, causing a trade deficit of 63.9 billion yen ($666 million), the third shortfall this year.

Automobile exports fell 15 percent, the ministry said.

Isuzu, Hino

Isuzu Motors, Japan's largest maker of light-duty trucks, reduce output from next month and cut 1,400 temporary and part- time workers. Hino, the country's largest heavy-duty truckmaker, will stop production at a Tokyo plant for five days next month. Both companies slashed profit forecasts last month.

``Declines in exports and production may work as a vicious circle for the economy,'' said Soichi Okuda, chief economist at Sumitomo Research Institute in Tokyo. ``Japan's downturn will probably continue through the first quarter of next year.''

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