Japan's Export Decline Eases as Stimulus Spending Boosts Global Economy
Oct. 22 (Bloomberg) -- Japan’s exports fell at the slowestpace in 10 months in September as stimulus spending in Chinadrove demand for the nation’s cars and machinery.
Shipments abroad dropped 30.7 percent from a year earlier,compared with a 36 percent decline in August, the FinanceMinistry said today in Tokyo. Exports to China, Japan’s biggestmarket, fell 13.8 percent, half the pace of the previous month.
China’s 4 trillion yuan ($586 billion) in spending onbuilding projects and consumer incentives is spurring sales formanufacturers including Honda Motor Co. and Komatsu Ltd. Evenso, the improvement in Japan’s trade performance may becurtailed by a yen that’s gained against all 16 majorcurrencies this year, making exporters’ products more expensiveand eroding the value of their profits earned abroad.
“The stimulus effects and the rebuilding of inventoriesin Asia, especially China, are helping Japanese exports,” saidKyohei Morita, chief economist at Barclays Capital in Tokyo.“But the stronger yen is putting Japan at a disadvantage”compared with its Asian rivals like South Korea, he said.
Imports slid 36.9 percent, leaving a trade surplus of520.6 billion yen ($5.7 billion), the ministry said. From amonth earlier, exports fell 0.8 percent.
The yen traded at 90.97 per dollar at 10:49 a.m. in Tokyofrom 90.80 before the report was published. Japan’s currencyaveraged 14 percent higher against the dollar in Septembercompared with the same month in 2008, Bloomberg data show. TheNikkei 225 Stock Average lost 1.1 percent.
Asian Shipments
Shipments to Asia slid 22.2 percent after a 30.6 percentdecline in August. Sales to the U.S. dropped 34.1 percent,little changed from a month earlier. Exports to Europe slumped38.6 percent.
Honda boosted September sales in China 27 percent to59,140 vehicles. Sales of construction equipment in Chinahelped Komatsu increase its operating profit by about 25percent last quarter versus the previous period, the Nikkeinewspaper reported this week. Komatsu reports earnings Oct. 29.
Japan’s exports are declining at a slower pace whenmeasured by volume. The ministry’s index of trade volume, whichstrips out the effect of currency fluctuations, showedshipments abroad fell 21.8 percent in September from a year ago.
Still, while the revival in demand has fueled six monthsof gains in industrial production, a third of the country’sfactory capacity remains idle in the wake of the worst postwarrecession.
Still Far to Go
“The global situation has improved and that’s reflectedin the pickup in global export demand after having fallen offso sharply at the end of last year,” said David Cohen,director of Asian economic forecasting at Action Economics inSingapore. “But remember we still have a ways to go before werecover to pre-crisis levels.”
South Korean and Taiwanese exporters are enjoying a fasterrecovery than Japan. Korean exports fell 6.6 percent inSeptember, easing from 20.9 percent in August, and Taiwan’sshipments slid 12.7 percent, half the pace of the previousmonth.
The yen’s gain is prompting Honda and Toyota Motor Corp.to consider increasing overseas output to regain market sharelost to Korean rivals such as Hyundai Motor Co.
‘Big Impact’
The currency’s rise may “have a big impact on Japaneseproduction,” Honda’s President Takanobu Ito said at the TokyoMotor Show yesterday. “We must think about producing overseaswhat is now being produced in Japan,” Toyota’s Executive VicePresident Takeshi Uchiyamada said.
Another reason why Japan’s trade rebound has lagged behindothers in Asia is because it concentrates on producingmachinery used in factories, sales of which typically pick upin the later stages of a recovery when businesses are investing,said economist Masamichi Adachi.
“Demand for capital goods is always weak at the beginningof a recovery. These goods aren’t produced by Taiwan or Korea.They’re made by Japan,” said Adachi, senior economist atJPMorgan Chase & Co. in Tokyo. “By year end, I think we’ll beable to say that shipments of capital goods are much better.”
To contact the reporters on this story:Jason Clenfield in Tokyo at jclenfield@bloomberg.net;Kyoko Shimodoi in Tokyo at kshimodoi@bloomberg.net
Last Updated: October 21, 2009 21:50 EDTSource: Bloomberg
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