Japan exports shrink as global crisis grips Asia

Japan exports shrink as global crisis grips Asia


TOKYO

Friday, July 25, 2008

JAPAN'S exports unexpectedly fell in June for the first time in nearly five years as shipments to emerging markets sputtered after sustaining growth through the first year of the global credit crisis.

Exports to Asia grew at their weakest pace in three years with demand from China, Japan's biggest customer, growing at less than half the pace of May.

China and other emerging markets have largely escaped the initial impact of the global credit crisis triggered by US mortgage defaults. But with the world's main export markets in Europe and North America reeling from bank failures and a lending squeeze, a global slump looks increasingly likely.

"Exports to many Asian countries fell from the previous year, which suggests intra-regional trade in Asia may be losing momentum," said Maiko Noguchi, senior economist at Daiwa Securities SBMC.

"If the slowdown in the United States and Europe continues, that will affect Asian economies. Demand from emerging economies alone will not be enough to lead export growth," she said.

Japan's exports fell 1.7 per cent in June from a year earlier, marking the first fall in 55 months and surprising economists who had forecast a 3.8 per cent rise.

The decline was largely due to weak US and European demand for Japanese cars, as well as slowing exports to Asia, which make up about half of total exports of the world's second biggest economy.

Shipments to Asia rose 1.5 per cent from a year earlier, the smallest gain since May 2005, although a sharp drop in ship exports which tend to be volatile may have skewed the data. China-bound shipments rose 5.1 per cent, compared with a 12.2 per cent rise in May.

Exports to India, Asia's third-largest economy, which rose more than a third in the first half of this year, slowed to a 19.3 per cent rise in June. Sales to another fast-growing emerging economy, Brazil, also slowed, rising 20.7 per cent in June compared with an annual increase of 29.9 per cent in January-June.

That meant Japan may no longer count on Asia to make up for weak demand from industrialised nations. Exports to the United States fell 15.4 per cent, the biggest drop since November 2003. Those to the European Union were also down 11.2 per cent, the largest fall since March 2002.

Some companies are already feeling the pinch. Japanese auto giant Toyota Motor Corp is expected to revise down its global sales forecast for 2008 this month to factor in a sharp downturn in US demand for light trucks.

The decline in exports, combined with a rise in imports, slashed Japan's June trade surplus to ¥138.6 billion (US$1.28 billion), down 88.9 per cent from a year earlier.

The fall in exports supports the view that the Japanese economy contracted in April-June and raises the prospect that the economic expansion that started in 2002, Japan's longest in the post-war period, could be coming to an end.

The government has already conceded that the economy may be approaching a turning point.

"The data suggests that the contribution of net exports to GDP in April-June will probably turn out as zero or negative," said Junko Nishioka, an economist at the Royal Bank of Scotland.

Reuters