Japan Trade Show Signs of Recoveryby
Japan's exports fell at the slowest pace in 14 months in November as demand from Asia supported the nation's recovery from its worst postwar recession.
Shipments abroad slid 6.2 percent from a year earlier, the smallest drop since September 2008, the Finance Ministry said today in Tokyo. From a month earlier, exports rose a seasonally adjusted 4.9 percent, the biggest advance since November 2002.
Worldwide government spending has spurred demand for cars and electronics goods made by companies including Fuji Heavy Industries Ltd. and Elpida Memory (6665:JP). The improvement in shipments may ease concern Japan's economic recovery will stall after reports this month showed confidence among large manufacturers rose the least in three quarters and companies plan deeper spending cuts.
"Economic growth may slow in the months ahead as domestic demand remains weak," said Yoshiki Shinke, senior economist at Dai-Ichi Life Research Institute in Tokyo. "But exports are looking solid, so Japan should at least be able to avoid another recession."
The improvement in exports is partly due to a favorable year-on-year comparison, economists including Shinke said. In November 2008, shipments abroad tumbled 26.8 percent as global trade froze following the collapse of Lehman Brothers Holdings Inc.
The median estimate of 17 economists surveyed by Bloomberg News was for exports to drop 6.8 percent from a year earlier.
Imports slid 16.8 percent in November from a year earlier, the slowest decline in 12 months, the ministry said. Japan posted a trade surplus for a 10th straight month, totaling 373.9 billion yen ($4.1 billion).
Exports are mending even as the strengthening yen erodes the value of profits companies earn abroad and makes their products less competitive. Japan's currency traded at 90.41 per dollar at 9:57 a.m. in Tokyo from 90.46 before the report. It has weakened since hitting a 14-year high of 84.83 on Nov. 27. The Nikkei 225 Stock Average rose 0.6 percent.
Fuji Heavy (7270:US), the maker of Subaru cars, expects to boost sales in the U.S. and China next year by 15,000 vehicles in each market, Chief Executive Officer Ikuo Mori said in an interview on Dec. 16.
Elpida Memory, Japan's largest computer-memory chipmaker, may return to profit for the first time in three years, thanks to higher demand, Chief Executive Officer Yukio Sakamoto said this month.
Exports to China and Asia both rose for the first time since September 2008. Shipments to Asia advanced 4.7 percent from a year earlier, compared with a 15 percent drop in October. Exports to China, Japan's biggest overseas customer, climbed 7.8 percent, compared with a 14.4 percent decline the previous month.
Asian economies are benefiting from a global trade rebound that's being driven by interest-rate cuts and more than $2 trillion in government spending worldwide. Growth in China will accelerate to 9.4 percent next year, according to the median estimate of economists surveyed by Bloomberg News.
"Exports to Asia are strong so Japan will be able to avoid a double-dip recession even though a slowdown in domestic demand is unavoidable," said Azusa Kato, an economist at BNP Paribas in Tokyo. "Demand in Asia is strong enough to offset the adverse impact of the yen's gain."
Sales to the U.S. fell 7.9 percent, easing from October's 27.6 percent decrease and automobile shipments to the nation rose for the first time since April 2008, the Finance Ministry said. Exports to Europe slid 15.9 percent after declining 29 percent.
"Exports to the U.S. have hit bottom and are starting to gradually rise," Dai-Ichi Life's Shinke said. "Even though it's not as strong as Asia, it's positive for Japan's economy."
Some companies are coping with the rising currency by trimming costs. Toyota Motor (7203:JT) may avoid an annual loss if the yen trades around 90 per dollar because the automaker will postpone investments and cut costs, the Asahi newspaper reported on Dec. 16.
Japanese policy makers are trying to sustain a recovery that's under threat from the currency's gains and deflation. Prime Minister Yukio Hatoyama unveiled a 7.2 trillion yen economic stimulus package on Dec. 8, a week after the Bank of Japan released a 10 trillion yen credit program. The central bank said last week that it "does not tolerate" falling prices.
The export revival has yet to spread to the domestic economy. Large companies plan to cut spending 13.8 percent in the year ending March 2010, the second-worst projection on record, the Bank of Japan's Tankan survey showed last week. Economic growth slowed to an annualized 1.3 percent in the third quarter, about half the pace of the previous three months.
Household confidence fell in November for the first time this year and wages have slumped for 17 months.
"Even though exports are strong, domestic demand is weaker than people expected earlier this year as employment has worsened rapidly," said Junko Nishioka, chief economist at RBS Securities Japan Ltd. in Tokyo. "That signals the recovery in external demand and the stimulus effects won't be enough to sustain growth."