Japan Exports Slide Even as Yen Decline Improves ’13 Outlook

Japan Tallies Weak Yen as Prices Rise Without Export Gain
A worker cycles past shipping containers stacked at a container terminal in Tokyo, Japan. Photographer: Kiyoshi Ota/Bloomberg

Japan’s exports fell for a sixth month in November and the trade deficit swelled, underscoring the challenge that incoming Prime Minister Shinzo Abe faces in reviving growth.

Shipments slid 4.1 percent from a year earlier, the Finance Ministry said in Tokyo today. The median forecast of 23 economists was for a 5.5 percent decline. Imports rose 0.8 percent leaving a deficit of 953.4 billion yen ($11.3 billion), the third-largest on record.

The Nikkei 225 Stock Average rose above 10,000 for the first time since April on speculation that the Bank of Japan will expand monetary stimulus, a move that could aid exports by fueling more declines in the yen. JPMorgan Chase & Co. and Bank of America Merrill Lynch forecast that that the central bank will add 10 trillion yen to an asset-purchase fund at a policy meeting that ends tomorrow.

“We’re in a manufacturing-led recession,” said Takuji Okubo, Tokyo-based chief economist at Japan Macro Advisors, formerly of Goldman Sachs and Societe Generale SA. “While Abe should be able to help exporters by pushing monetary easing to weaken the yen, he may find it difficult to implement an effective fiscal stimulus package given Japan’s mounting debt.”

The Nikkei 225 rose 1.1 percent as of 11:18 a.m. in Tokyo. The yen was down 0.1 percent against the dollar at 84.31, close to a 20-month low, a slide that may improve the outlook for shipments next year.

Economic Contraction

Japan’s economy has contracted for two straight quarters, meeting the textbook definition of a recession. Hiromichi Shirakawa, chief Japan economist at Credit Suisse Group AG in Tokyo, estimates that gross domestic product this quarter will fall an annualized 3.6 percent after dropping 3.5 percent in the three months through September.

The cumulative trade deficit for the first 11 months of 2012 was 6.28 trillion yen, more than double the record deficit in 1980. Exports to the U.S. exceeded those to China for the first time since December 2008, excluding seasonal factors, the ministry said.

Exports to China fell 14.5 percent from the previous year as shipments of construction equipment tumbled almost 75 percent and cars dropped 68 percent by value, improving from an 84 percent decline in October. Exports to the European Union dropped 19.9 percent, while those to the U.S. rose 5.3 percent.

Increasing purchases of mobile phones from Korea and China accounted for some of the rise in imports, the ministry said.

Abe told BOJ Governor Masaaki Shirakawa yesterday that he campaigned on ending deflation and correcting the strong yen, and said that he wanted to introduce a 2 percent inflation target.

2013 Improvement

“The improvement of overseas economies will cause a pickup in exports in the second half of 2013,” Junko Nishioka, chief economist at RBS Securities Japan Ltd., said before the report. At the same time, “the trade deficit will probably not shrink much, as the weaker yen will raise the cost of energy imports.”

Analysts’ median estimate was for a trade deficit of 1.04 trillion yen on weakness in exports to Europe and China and nuclear plant shutdowns that increased demand for energy imports.

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