Japan’s Exports Slide for a Third Month on China-EU Slowdown

Japan’s exports fell 5.8 percent in August from a year earlier, the third straight decline, as a territorial dispute with China and weak global demand cloud the outlook for shipments.

Japan’s exports fell 5.8 percent in August from a year earlier, the third straight decline, on weakness in demand from the European Union and China.

Imports slid 5.4 percent, leaving a trade deficit of 754.1 billion yen ($9.6 billion), the Finance Ministry said in Tokyo today. Median forecasts in Bloomberg News surveys of analysts were for a 7.5 percent export decline and an 829.3 billion yen trade gap.

Tensions between China and Japan over disputed islands are a risk for bilateral trade in goods from rice to tractors that has tripled in the past decade to more than $340 billion. Strength in the yen will weigh on exports even after the Bank of Japan (8301)’s surprise decision yesterday to expand monetary easing, with the currency up about 7 percent against the dollar since mid-March.

“Exports are in a downward trend as the global economy is slowing,” said Yoshimasa Maruyama, chief economist at Itochu Corp. in Tokyo. “The territorial dispute between Japan and China could pose a risk.”

The central bank yesterday expanded its asset-purchase fund by 10 trillion yen. The yen traded at 78.39 per dollar as of 10:15 a.m. in Tokyo, little changed from before the data were released. The Nikkei 225 Stock Average fell 0.3 percent from yesterday, when it reached a five-month high.

Falling Shipments

Imports fell the most since December 2009 on lower oil prices, the government said. Japan reported a record trade deficit with the EU of 96 billion yen as exports to that region slipped 22.9 percent from a year earlier.

The report showed shipments to China decreased 9.9 percent, the third monthly decline, after Bank of Japan Governor Masaaki Shirakawa said yesterday that China’s slowdown was a major topic at the central bank's latest policy meeting.

Sales to the U.S. rose 10.3 percent, the 10th consecutive rise, with increased shipments of auto parts and mining and construction machinery, the government said.

A recovery in U.S. consumer demand signals the world’s biggest economy is heading for a rebound, Maruyama said. “The state of the U.S. economy is better relative to Europe and other areas,” he said.

The ninth trade deficit in 12 months highlights Japan’s increased reliance on energy imports after nuclear reactors were shut down following last year’s earthquake and tsunami and the crisis at the Fukushima plant.

The Bank of Japan downgraded its economic assessment yesterday, saying growth has “come to a pause” while overseas economies have moved “somewhat deeper into a deceleration phase.” Credit Suisse Group AG and BNP Paribas expect Japan’s economy to contract this quarter after growth slowed to a 0.7 percent annual pace in the previous three months.

To contact the reporters on this story: Andy Sharp in Tokyo at asharp5@bloomberg.net; Mayumi Otsuma in Tokyo at motsuma@bloomberg.net

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

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