Japan’s exports down 45% year on year

As an export-driven country, a fall in export doesn't bode well at all.

Article quotes: 'Economists expect the Japanese economy to remain depressed until exports revive, particularly to its two main markets of the US and China.'

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25 Feb 09 (FT)

Japan’s exports down 45% year on year

Japan last month suffered a fall of nearly 50 per cent in exports, leading to the country’s worst trade deficit ever and fuelling fears that the recession will be longer and deeper than previously anticipated.

Japanese exports fell 45.7 per cent in January, compared with the same month last year, according to the finance ministry, as demand dried up from Europe and Asia as well as the US.

Exports to Asia sank by 46.7 per cent, the fourth straight month of decline, with shipments to China falling by 45.1 per cent. Many Japanese companies ship automobile and consumer electronics parts to assembly lines in Asia, from which final products are shipped to countries across the globe.

Japanese industrial output is expected to have fallen by 10 per cent in January, according to a Reuters poll – an even deeper fall than that seen in December.

The stock market brushed aside the gloomy trade figures and took cheer from the yen’s slide against the US dollar.

The benchmark Nikkei average rose 2.7 per cent to close at 7,461.22 as the yen touched a three-month low of Y97 against the dollar, its slide fuelled by the pace of decline in the economy and political uncertainty as the ruling Liberal Democratic party struggles to combat the deepening recession.

However, the drop in exports was the steepest since 1957 and follows three consecutive months of large export declines, which have forced Japanese manufacturers from Toyota to Sony to slash domestic production and eliminate jobs at an unprecedented pace.

The continuing rapid deterioration in global demand for Japanese products reinforced concerns that the economy would suffer another quarter of acute contraction, after gross domestic product shrank 3.3 per cent in the last three months of last year.

“The speed and extent of the decline in exports have increased. Exports are declining across a wider variety of products and to a broader range of geographic regions,” said Kyohei Morita, economist at Barclays Capital in Tokyo.

In addition to the global downturn, the January export figures were affected by a particularly strong rise in the yen during that month and the Chinese new year, which began early, Mr Morita said.

Automobile exports, which comprise about 20 per cent of all exports, suffered a particularly large decline, falling 66 per cent year-on-year.

Many economists expect the Japanese economy to remain depressed until exports revive, particularly to its two main markets of the US and China.

In the US, a key export market for Japan, Federal Reserve chairman Ben Bernanke warned on Tuesday that the severe domestic recession could drag into next year.