Japan Exports Fall a Second Month as BOJ Sees Weakness on Europe: Economy

Japan’s exports fell and the central bank lowered its assessment of the economy for a second straight month as weakening demand in Europe and Asia weigh on the outlook for global growth.

Shipments dropped a more-than-expected 4.5 percent in November from a year earlier, a Ministry of Finance report showed today in Tokyo. The Bank of Japan separately kept its asset-buying fund and credit-lending program unchanged, even as it said that a pick-up in activity has paused.

“Pressure on the BOJ to consider further easing is surging,” said Naomi Hasegawa, a strategist at Mitsubishi UFJ Morgan Stanley in Tokyo. “Exports are losing steam.’”

Japanese manufacturers are cutting profit and spending forecasts as a yen near a postwar record against the dollar erodes confidence in the recovery from a March 11 earthquake and tsunami. The nation’s credit rating was lowered one step from the top AAA grade by Rating & Investment Information Inc. today, citing delays in overhauling social security financing.

The median estimate of 29 economists surveyed by Bloomberg News was for a 4.3 percent decline in exports. In October, shipments slid a revised 3.8 percent. The central bank said today that activity in the world’s third-biggest economy will “remain more or less flat for the time being.”

Asset Fund

The central bank kept its asset-buying fund at 20 trillion yen ($257 billion), and a credit-lending program at 35 trillion yen. The benchmark interest rate stayed at a range of zero to 0.1 percent. The unanimous decisions were in line with predictions of all 14 economists surveyed by Bloomberg News.

Europe’s crisis ’’is already starting to affect Japan’s exports and production,’’ Bank of Japan Governor Masaaki Shirakawa said in Tokyo today. “We must continue to pay due attention to the possibility that the problem will weaken the growth of the world economy as well as the Japanese economy.”

Shirakawa said it’s hard to specify when the Japanese economy will return to a moderate recovery.

Meantime, Japan’s government left its economic assessment unchanged for the second straight month, a Cabinet Office report showed today. It said the economy is slowly picking up from March’s disaster with businesses exercising caution because of the yen’s appreciation and the European debt crisis.

Japan’s trade deficit widened to 684.7 billion yen in November from a revised 280.2 billion yen in October, today’s figures showed. Exports to Asia fell 8 percent while shipments to China declined 7.9 percent, according to the Ministry of Finance. Overseas sales to the U.S. rose 2 percent in November.

Asian Growth

The figures “reflect the weak fundamentals of the Asia economy, especially China,” said Takuji Okubo, chief Japan economist at Societe Generale Securities in Tokyo. “Momentum in Asia is still downward, while the U.S. economy seems to have accelerated in the fourth quarter.”

Asian stocks rose for a second day, with a benchmark index poised for the biggest gain in two weeks, after U.S. housing starts increased more than economists forecast.

The MSCI Asia Pacific Index (MXAP) advanced 2.1 percent as of 3:25 p.m. in Hong Kong. The gauge dropped to a three-week low on Dec. 19 after North Korean leader Kim Jong Il died and Fitch Ratings said it may cut the credit ratings of European nations.

Other reports in the Asia-Pacific region today showed New Zealand’s current-account deficit widened as a share of the economy. The shortfall was 4.3 percent of gross domestic product in the year ended Sept. 30, from 3.7 percent in the 12 months through June, Statistics New Zealand said in Wellington.

In Europe in the day ahead, a report may show Italy’s economy contracted 0.2 percent in the third quarter from the April-June period and Swedish consumer confidence deteriorated this month, according to median estimates of economists surveyed by Bloomberg.

Home Sales

In the U.S., a National Association of Realtors report may show sales of existing homes increased to a 5.05 million annual rate in November, a separate survey of forecasts showed, from a 4.97 million pace a month earlier.

Builders in the U.S. broke ground in November on more houses than at any time in the past 19 months, led by a surge in multifamily units, Commerce Department figures released yesterday in Washington showed.

Starts increased 9.3 percent to a 685,000 annual rate, exceeding the highest estimate of economists surveyed by Bloomberg News and the most since April 2010.

Japan’s currency is seen by investors as a haven from the turmoil in Europe. The crisis in the euro region, Japan’s third- biggest export market, is “escalating,” Christine Lagarde, the managing director of the International Monetary Fund, said last week.

Yen’s Gains

Fitch Ratings lowered the credit outlook of AAA-rated France on Dec. 17, citing Europe’s inability to find a comprehensive solution to its debt crisis.

With the Japanese currency close to a postwar high against the dollar, exporters are calling on the government to intervene again in the currency markets.

The yen touched 100.76 per euro on Oct. 4, the strongest since June 2001 and was at 77.87 to the U.S. dollar as of 10:49 a.m. The yen has gained 7.6 percent in the past 12 months against the U.S. dollar, making it the strongest performer among the Group of 10 currencies for the period.

Nissan’s Chief Executive Officer Carlos Ghosn said last month that Japan’s second-largest carmaker will gradually shift production overseas to counter the strength of the yen. It’s “difficult to make an investment in a country with no return,” he said. “The yen is a huge handicap for exporters.”

The government said yesterday that Japan will expand funds for currency intervention in its fourth supplementary budget for the current fiscal year. Authorities sold a record amount of yen in the month from Oct. 28, Finance Ministry data show.

A central bank report last week indicated Japan’s largest manufacturers were bracing for a slowdown as sentiment fell from three months ago and companies pared their profit and capital spending forecasts.

To contact the reporter on this story: Andy Sharp in Tokyo at asharp5@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

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