Japan Exports Fall Least in a Year on Global Stimulus

By Keiko Ujikane and Kyoko Shimodoi

Nov. 25 (Bloomberg) -- Japan’s exports fell at the slowest pace in a year in October as worldwide government spending boosted demand, sustaining the economic recovery.

Shipments abroad slid 23.2 percent from a year earlier, compared with a 30.6 percent decline in September, the Finance Ministry said today in Tokyo. The median estimate of 18 economists surveyed by Bloomberg was for a 26.8 percent drop.

The figures suggest Japan’s rebound from its deepest postwar recession will extend into this quarter as Asian demand spurs sales for manufacturers from Honda Motor Co. to Hitachi Construction Machinery Co. Exports helped the economy expand at the fastest pace in more than two years in the third quarter, even as prices of goods declined and the yen gained.

“Exports to Asia have been very strong,” said Seiji Shiraishi, chief economist at HSBC Securities Japan Ltd. in Tokyo. “By January to March next year, we should start to see a slowdown” as the effect of global stimulus fades, he said.

The yen rose to 88.25 per dollar at 11:02 a.m. in Tokyo from 88.61 before the report was published. Japan’s currency has climbed more than 6 percent in the past three months, eroding exporters’ profits and driving import costs lower.

Bigger Surplus

Imports slid 35.6 percent from a year earlier, the ministry said. The improvement in exports helped the trade surplus climb to 807.1 billion yen ($9.1 billion), the biggest since March 2008 and larger than the 465.5 billion yen median estimate of analysts. From a month earlier, exports rose 2.5 percent, the fastest pace since April.

Asian economies are benefiting from a global trade rebound that’s being driven by interest-rate cuts and more than $2 trillion in government spending worldwide. Taiwan’s export orders climbed in October for the first time in 13 months. Chinese exports fell at the slowest pace in 10 months.

Honda Motor, Japan’s second-largest carmaker, almost tripled its full-year profit forecast as government stimulus measures boosted demand for fuel-efficient vehicles. Hitachi Construction Machinery, Asia’s second-largest excavator maker, returned to profit last quarter as cost cuts countered a sales slide triggered by the global recession.

“Looking ahead, Japan’s economy may sustain a gradual recovery driven by an increase in exports, although personal consumption and public works spending are expected to decline,” said Yoshiki Shinke, a senior economist at Dai-Ichi Life Research Institute in Tokyo.

Asian Demand

Shipments to Asia fell 15 percent from a year earlier, easing from a 22.2 percent drop in September, the ministry said. An index measuring the volume of exports to Asia rose to the highest in a year. Exports to China, Japan’s biggest overseas customer, slipped 14.3 percent, compared with a 13.8 percent decline the previous month.

Sales to the U.S. fell 27.6 percent, moderating from September’s 33.9 percent decrease as retail sales in Japan’s second-largest market picked up. Exports to Europe slid 29 percent after slumping 38.6 percent.

While exports are leading Japan’s recovery, weakness in the domestic economy persists. Anabuki Construction Inc. filed for bankruptcy yesterday with 140 billion yen in debt, the country’s fifth-largest business failure this year.

Falling prices in Japan threaten to squeeze profits and wages, smothering demand in an economy that analysts say may slow in coming months once global stimulus effects wane. The government last week declared the economy is in deflation for the first time in three years and pressed the Bank of Japan to be more aggressive about tackling price declines.

“Japan’s economy is in chronic deflation,” said Yasunari Ueno, chief market economist at Mizuho Securities Co. in Tokyo. “Deflation is strengthening little by little” because weak demand and a higher yen are exerting downward pressure on prices, he said.

To contact the reporter on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net