Japan’s Exports Plummet Record 35%, Signaling More Job Cuts

By Jason Clenfield

Jan. 22 (Bloomberg) -- Japan’s exports plunged by a record in December, signaling companies will be forced to shut factory lines and fire more workers, driving the economy deeper into recession.

Exports plummeted 35 percent from a year earlier, the sharpest decline since 1980, the earliest year for which there is comparable data, the Finance Ministry said today in Tokyo. The December drop eclipsed a record 26.7 percent decline set the previous month. Economists predicted a 30.3 percent contraction.

The Bank of Japan today forecast the economy will shrink until the year starting April 2010 and said it may start buying corporate bonds to improve funding for businesses. Toyota Motor Corp., Sony Corp. and Honda Motor Co. are shedding thousands of workers and closing factory lines as profits and sales dwindle.

“This recession will be deep and widespread,” said Kyohei Morita, chief Japan economist at Barclays Capital in Tokyo. “Given today’s numbers, households should prepare for more job and wage cuts.”

The yen traded at 89.35 per dollar as of 3:54 p.m. in Tokyo from 89.14 before the report. Japan’s currency has gained 19 percent in the past year, further eroding exporters’ profits. The Nikkei 225 Stock Average rose 1.9 percent to 8,051.74 at the close in Tokyo, reversing earlier losses on optimism the central bank’s measures will help companies get access to cash.

Imports fell 21.5 percent from a year earlier, not enough to prevent a trade deficit of 320.7 billion yen ($3.6 billion), the third in a row.

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Shipments to the U.S., China and Europe all fell by the most ever as the global recession spread, today’s report showed. Exports to Asia, which make up about half of Japan’s total shipments, declined 36.4 percent.

Exports to China slid 35.5 percent. Asia’s second-largest economy expanded 6.8 percent last quarter, the slowest pace in seven years, the government said today. Exports to the U.S. dropped 36.9 percent and to Europe tumbled 41.8 percent.

Factory output dropped 8.5 percent in November, the most in more than a half century, and machinery orders, an indicator of future capital spending, fell by the most ever.

Sony today forecast its first annual loss in 14 years. The world’s second-largest consumer-electronics maker also said it’s considering stopping production at one of two television factories in Japan to cut costs.

Toyota, which is forecasting its first operating loss in seven decades, may cut all 4,500 temporary workers because of sluggish demand, the Yomiuri newspaper said this week, without citing where it obtained the information.

Fire Workers

Honda said last week it plans to fire all of its 3,100 temporary workers by the end of April. President Takeo Fukui said last month the automaker may be forced to shift more of its production overseas if the yen strengthens further.

Every 1 yen gain against the dollar cuts Honda’s operating profit by 18 billion yen, according to the company. A stronger currency eats into the value of repatriated earnings and makes exported products more expensive overseas.

The Bank of Japan forecast that the economy will shrink 1.8 percent in the year ending March 31 and 2 percent next year. Mounting evidence the economy is in crisis prompted the central bank to cut interest rates to 0.1 percent last month.

Governor Masaaki Shirakawa’s policy board today said it may start buying corporate bonds of up to one year in maturity to prevent a shortage of credit from worsening the recession. It also announced details of a plan to purchase as much as 3 trillion yen of commercial paper, short-term debt companies use to fund daily operations.

The government has been unable to pass a stimulus package that could help encourage domestic spending in the absence of export demand. Prime Minister Taro Aso, who has called the recession a “once in a 100 year” crisis, is struggling to get approval from the opposition-led upper house to spend 10 trillion yen ($111 billion) to aid companies and households, whose sentiment fell to a record low this month.

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