Oct. 22 (Bloomberg) -- Japan’s exports fell the most since the aftermath of last year’s earthquake as a global slowdown, the yen’s strength and a dispute with China increase the odds of a contraction in the world’s third-largest economy.
Shipments slid 10.3 percent in September from a year earlier, leaving a trade deficit of 558.6 billion yen ($7 billion), the Finance Ministry said in Tokyo today. The median forecast in a Bloomberg News survey of analysts was for a 9.9 percent export decline. Imports rose 4.1 percent.
Economy Minister Seiji Maehara pressed the Bank of Japan for more action yesterday, saying the nation is “falling behind” in monetary stimulus and is at risk of another credit-rating downgrade. The BOJ today cut its view of eight out of nine regional economies while Taiwanese unemployment rose to a one-year high, underscoring weakness across Asia after China’s third-quarter growth was the slowest since 2009.
“There’s a high chance that Japan’s economy will have two consecutive quarters of contraction through December,” said Yoshimasa Maruyama, chief economist at Itochu Corp. in Tokyo. “The slump in advanced nations is spreading to emerging economies.”
The yen weakened 0.6 percent to 79.78 per dollar as of 5:57 p.m. in Tokyo on speculation that the central bank will expand monetary stimulus. The currency’s decline pushed the Nikkei 225 Stock Average to a 0.1 percent gain, reversing losses of as much as 1.5 percent, by improving the outlook for exporters.
The decline in shipments, exacerbated by a spat with China over islands in the East China Sea, was the biggest since May last year, when the country was rebuilding supply chains wrecked in the March earthquake and tsunami.
Shipments to China, the nation’s largest export market, slid 14.1 percent from a year earlier. Exports to the European Union fell 21.1 percent, while those to the U.S. rose 0.9 percent. Auto shipments to all markets dropped 14.6 percent.
In a speech in Tokyo today, BOJ Governor Masaaki Shirakawa vowed to conduct “seamless” monetary easing as the Japanese economy is “leveling off.” The banks’ quarterly regional report for October contained the most downgrades since 2009, with only Tohoku escaping because of reconstruction spending in the area hit hardest by last year’s earthquake.
Earlier this month, the International Monetary Fund’s Deputy Managing Director Naoyuki Shinohara said in an interview that the BOJ has room to ease further, adding international weight to calls for more action by the central bank.
Paul Sheard, chief global economist at ratings company Standard & Poor’s, said this month that the BOJ’s balance sheet has increased by about 36 percent since August 2008, compared with about 209 percent for the U.S. Federal Reserve and about 329 percent for the Bank of England. JPMorgan Securities Japan Co. and UBS AG expect the central bank to add to easing at its Oct. 30 board meeting.
Taiwan’s unemployment rate increased to 4.3 percent in September, the statistics bureau said in Taipei today. In Australia, the government announced spending cuts to help deliver a budget surplus. Elsewhere in the Asia Pacific region, Hong Kong reported higher-than-estimated inflation of 3.8 percent for September, while economic releases around the world include inflation in Poland and retail sales in Mexico.
Toyota Motor Corp. and Nissan Motor Co., Japan’s two largest carmakers, reported their steepest drops in China sales since at least 2008 in September, as today’s data showed that Japan’s auto exports to the country fell 44.5 percent.
The territorial dispute will knock 0.8 percentage point off Japan’s gross domestic product in the October-December period, JPMorgan said on Oct. 6. The brokerage, along with Morgan Stanley and Citigroup Inc., expects the economy to contract in the third and fourth quarters of this year.
The trade deficit was the first in the month of September since 1979 and compared with economists’ median estimate for a 547.9 billion yen shortfall. The rise in imports was higher than a 2.9 percent gain estimated by economists as the country bought more oil and liquefied natural gas.
“The reason behind the increase is very simple,” said Shohei Setoh, a Tokyo-based manager for a crude oil trading group at JX Nippon Oil & Energy Corp. “Everyone rushed to pass customs,” before a tax increase on oil imports that began Oct. 1.
The government last week said it would draw up spending measures to counter a slowdown. A yen around 5 percent from last year’s postwar high of 75.35 against the dollar is hurting manufacturers such as Sony Corp, making exports more expensive and reducing the value of repatriated earnings.
Japan’s government this month cut its economic assessment for a third straight month, the longest streak since the 2009 global recession. Data earlier this month showed falling machinery orders and shrinking factory capacity use in August. The International Monetary Fund forecasts the world economy will grow this year at its weakest pace since 2009, saying Oct. 9 there are “alarmingly high” risks of a steeper slowdown.
Economy Minister Maehara said yesterday that Japan needs more monetary easing and policy efforts to spur growth.
“There are fiscal-easing moves worldwide, but on a monetary basis Japan is falling short,” Maehara said in an interview with Fuji Television. While “easing is not a panacea,” without that and policy moves “Japan’s sovereign credit rating may face a downgrade,” he said.
Moody’s Investors Service cut Japan’s credit rating one level to Aa3 in August last year, citing a build-up in government debt since the 2009 global recession. S&P has had a negative outlook on the country’s AA- rating since April last year.
Public support for Prime Minister Yoshihiko Noda fell to 18 percent, the lowest level since he took office in September 2011, the Asahi Newspaper reported in Tokyo today, citing an Oct. 20-21 survey.
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