Nov. 21 (Bloomberg) -- Japan is suffering its worst year for exports since the global contraction in 2009 as Europe’s crisis, China’s slowdown and a diplomatic dispute with the Chinese hurt manufacturers and deepen the risk of a recession.
Shipments totaled 53.5 trillion yen ($653 billion) for January through October, down 2.3 percent from the same period in 2011, according to data compiled by Bloomberg from Finance Ministry figures released in Tokyo today. The trade deficit for 2012 so far is a record 5.3 trillion yen.
The so-called hollowing out of Japan’s export champions, highlighted by a cut in Panasonic Corp.’s debt rating to one step above junk status by Moody’s Investors Service yesterday, underscores the urgency of kindling domestic demand. Japan’s political parties are facing off ahead of an election next month on how hard to press the central bank to boost stimulus.
“There’s no doubt that Japan’s economy is already in a recession,” said Kiichi Murashima, chief economist at Citigroup Inc. in Tokyo. “Political pressure for further monetary easing is building, and we expect the BOJ to take additional measures in January.”
The yen slid to a seven-month low after the trade data were released, trading at 81.89 per dollar as of 3:36 p.m. in Tokyo after touching 81.97. The Nikkei 225 Stock Average advanced for the fifth time in six trading days, closing up 0.9 percent amid the weaker yen and speculation that the opposition Liberal Democratic Party, led by Shinzo Abe, will form the next government and push the BOJ into increased stimulus.
Exports in October fell for a fifth month, down 6.5 percent from a year earlier and leaving a trade deficit of 549 billion yen, the Finance Ministry said. That compared with the median forecast of 25 economists for a 4.9 percent decline.
Shipments to China, Japan’s largest export market, fell 11.6 percent as a territorial spat over islands in the East China Sea takes its toll on the $340 billion trade relationship between Asia’s two biggest economies. Exports to the European Union fell 20.1 percent on year, while those to the U.S. were up 3.1 percent.
“The slump in exports will probably continue this quarter,” said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance Co. in Tokyo. “China’s economy probably hit a bottom in the July-September period, but its recovery may be limited this quarter and there’s no sign that Chinese consumers will stop boycotting Japanese cars.”
Japan’s exports for the first ten months of this year are the lowest for the same period since 2009, even including 2011 when the earthquake in March and flooding in Thailand crimped production at Japanese manufacturers. While the yen is at a seven-month low, it is still more than 30 percent higher than five years ago, hurting exporters’ profits.
Japan will probably slide into recession this quarter on weakness in domestic consumption and the decline in exports, which account for about 15 percent of the economy. Gross domestic product shrank an annualized 3.5 percent last quarter, and the economy may contract a further 0.4 percent in the final three months of this year, the third technical recession since 2008, according to a Bloomberg News survey of economists.
Japanese recessions are officially defined by a government-charged panel that considers data beyond figures for gross domestic product.
Bank of Japan Governor Masaaki Shirakawa yesterday pushed back against pressure on the central bank, criticizing the unlimited easing advocated by Abe and urging respect for the BOJ’s independence. The central bank held off from monetary easing after expanding asset purchases in September and October, switching the focus to a December meeting where more measures are forecast.
Elsewhere in Asia, sales at major South Korean department stores declined for a fifth month in October, down 0.4 percent from a year earlier after a 0.8 percent drop in September, the Ministry of Knowledge Economy said.
A leading index for China rose in October, the Conference Board said today. The Bank of England will release the minutes of its Nov. 7-8 meeting, when officials voted to halt expansion of their bond-purchase program. In the U.S., key data include jobless claims and mortgage applications, while the Bloomberg Consumer Comfort Index will give the latest reading on household confidence.
Japan’s motor vehicle exports to China fell 82 percent on year, the largest monthly drop since October 2001, the finance ministry said. Toyota Motor Corp., Asia’s largest automaker, said October deliveries in China declined 44 percent from a year earlier. Nissan Motor Co. cut its full-year profit forecast by 20 percent.
The government last week reduced its economic assessment for a fourth straight month, the longest streak since the 2009 global recession. Data earlier this month showed machinery orders and domestic factory capacity use falling for a second month in September. Retail sales in September rose less than expected as the expiry of government subsidies for car purchases sapped consumer demand.
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