Japan Exports Fall at Slower Pace as Recession Eases

By Jason Clenfield

May 27 (Bloomberg) -- Japan’s export slump moderated in April, helping the country post an unexpected trade surplus and adding to signs the worst recession since World War II is easing.

Shipments abroad fell 39.1 percent from a year earlier, after dropping 45.5 percent in March and a record 49.4 percent in February, the Finance Ministry said today in Tokyo. From a month earlier, exports rose 1.9 percent, a second straight gain.

Exports to the U.S., China and Europe all fell at the slowest pace this year, adding weight to Bank of Japan Governor Masaaki Shirakawa’s contention that the economy will resume growing this quarter. U.S. consumer confidence jumped the most in six years, a report showed yesterday, and China’s $586 billion stimulus plan is spurring demand for Japanese machinery.

“Exports are getting back on a sustainable growth path, and that’s good news because they’re the sole pillar of support for the economy,” said Kyohei Morita, chief economist at Barclays Capital in Tokyo. “The overall economy will probably remain stagnant as there is no help from consumer spending and business investment.”

The Nikkei 225 Stock Average rose 1.7 percent at 12:31 p.m. in Tokyo. The yen traded at 95.46 per dollar from 95.27 before the report was published. Japan’s currency has gained 3.3 percent this month, threatening to exacerbate losses forecast this year by exporters including Toyota Motor Corp.

Imports Fall

Imports fell 35.8 percent from a year earlier, the ministry said, and the trade surplus narrowed 85 percent to 69 billion yen ($725 million). Economists predicted a deficit of 55 billion yen and a drop in exports of 42 percent.

Shipments to the U.S. fell 46.3 percent last month, less than March’s 51.4 percent decline. Exports to China dropped 25.8 percent, moderating from 31.6 percent, and sales to Europe slid 45.4 percent from 56.1 percent.

Goldman Sachs Group Inc. last week raised its ratings of construction equipment-makers Hitachi Construction Machinery Co. and Komatsu Ltd., citing the prospect of increased sales to China, where the stimulus package is driving building investment. Nissan Motor Co. said last month that sales of passenger cars in China rose 36 percent in March.

Toyota’s U.S. sales had a “slight uptick” this month, indicating that the market may have reached its bottom, Jim Lentz, president of the automaker’s U.S. sales unit, said last week. Rival Honda Motor Corp. plans to boost output at domestic factories and increase shipments this quarter as U.S. dealerships clear inventories, the Wall Street Journal reported.

Production Rebound

Industrial production probably rose 3.3 percent in April from a month earlier, the biggest jump in at least six years, economists expect a Trade Ministry report will show on May 29. Output climbed in March for the first time in six months.

Gross domestic product shrank at a record 15.2 percent annual pace last quarter. Governor Shirakawa said this week that while the economy may resume growing in the current quarter, any recovery will “inevitably be mild.”

At their April 30 meeting, a few Bank of Japan board members said additional policy measures weren’t necessary amid signs that the economy will recover, albeit gradually and after “some time,” minutes showed today. The central bank has been buying corporate debt to channel funds to companies since it cut the benchmark interest rate to 0.1 percent in December.

Extraordinary Measures

“Financial-market conditions are much better now, so it’s natural for the BOJ to think about ending its extraordinary measures for helping companies,” said Morita at Barclays.

Exports across Asia have been mixed. While shipments abroad fell at a slower pace in Taiwan and South Korea last month from March, Singapore and China suffered bigger drops.

Two quarters of record contractions in GDP have shrunk the Japanese economy to its 2003 size. Even as declines in overseas shipments moderate, Japan is exporting little more than half as much as last year and producing a third less. The recession, while moderating, is spreading to consumers as companies fire workers and cut wages to minimize losses.

“Exports and industrial production have stabilized, but this only gets the economy out of the emergency room,” said Martin Schulz, a senior economist at Fujitsu Research Institute in Tokyo.

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