Dec. 20 (Bloomberg) -- Japan's export growth cooled in November as the U.S. housing recession cut demand for automobiles and construction equipment.

Exports rose 9.7 percent from a year earlier, the Finance Ministry said in Tokyo today, after growth doubled in the previous month. The median estimate of 19 economists surveyed by Bloomberg News was for a 10.5 percent gain.

Shipments to the U.S. declined for a third month, the worst losing streak in more than three years. Japan's economy, the world's second-largest, is depending more on overseas markets just as world growth looks set to slow. Growth in shipments to Europe and China also slowed last month, today's report showed.

``We need to be on guard until the U.S. economy bounces back,'' said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo. ``Japan's economy still needs exports to make up for sluggish domestic demand.''

Imports rose 13.2 percent in November, the ministry said, after climbing 8.6 percent in the previous month, causing the trade surplus to fall 12.2 percent to 797.4 billion yen. Analysts expected an 11.8 percent increase. Exports, led by shipments to Europe and China, contributed almost all of Japan's 1.5 percent annualized growth in the third quarter.

The yen traded at 113.25 per dollar at 12:18 p.m. in Tokyo, from 113.24 before the report was published.

U.S., China

Exports to the U.S. fell 6 percent, more than the 1.5 percent decline a month earlier, the ministry said.

Shipments to China grew 13.7 percent, the slowest pace since February. Exports to the European Union rose 8.2 percent, the slowest rate since April 2006.

``The outlook for exports doesn't look bright,'' said Hiroshi Shiraishi, an economist at Lehman Brothers in Tokyo, citing the U.S. slowdown and the risk of further yen appreciation. Lehman forecasts the currency will rise about 16 percent to 95 yen per dollar by the second quarter of next year.

Half of Japan's shipments overseas are settled in U.S. dollars even though the country is relying more on China and other emerging markets for trade. The yen has surged 9 percent against the dollar in the past six months.

The currency is already hurting exporters' profits. Toyota Motor Corp.'s annual operating profit falls about 33 billion yen for every yen that the currency gains against the dollar past 115, according to Credit Suisse Group.

U.S. Recession

The Organization for Economic Cooperation and Development this month slashed its 2008 global growth forecast to 2.3 percent from 2.7 percent, citing the U.S. subprime loan crisis that has made banks less willing to lend. Former Federal Reserve Chairman Alan Greenspan last week said that the risk of a U.S. recession is increasing.

A faltering domestic economy will compel the Bank of Japan to keep its benchmark interest rate at 0.5 percent later today, according to all 44 economists surveyed by Bloomberg News.

Central bank Governor Toshihiko Fukui wants to gradually raise the key rate, the lowest among major economies, to avoid excessive investment that could cause problems for the economy later on. Of 31 economists surveyed, 21 said the bank won't raise the rate until the second half of 2008.

Not all exporters are suffering from slower demand overseas. Honda Motor Co., which sells about half of its autos in North America, said yesterday U.S. sales will increase 3 percent next year, thanks to higher demand for its fuel-efficient cars.

To contact the reporters on this story: Jason Clenfield in Tokyo at jclenfield@bloomberg.net; Lily Nonomiya in Tokyo at lnonomiya@bloomberg.net

Last Updated: December 19, 2007 22:23 EST