Japan’s Exports Slump Again

Dashing hopes for a quick recovery

By Jason Clenfield

June 24 (Bloomberg) — Japan’s export slump accelerated in May, casting doubt on the economy’s growth prospects as it struggles to emerge from the worst postwar recession.

Shipments abroad dropped 40.9 percent from a year earlier, more than April’s 39.1 percent decline, the Finance Ministry said today in Tokyo. The median estimate of economists surveyed was for a 39.3 percent decrease. From a month earlier, exports fell 0.3 percent, the first deterioration since February.

Declines in shipments to Asia deepened for the first time since January, damping hopes that demand from the region will spur a recovery in the world’s second-largest economy. China’s 4 trillion yuan ($585 billion) in stimulus measures haven’t been enough to offset sales declines in the U.S. and Europe for companies such as Hitachi Construction Machinery Co.

“Final demand just isn’t picking up and it’s still hard to expect a very strong economic recovery,” said Azusa Kato, an economist at BNP Paribas in Tokyo. Kato said the economy will “barely expand” in 2010 once the effect of Japan’s own economic stimulus measures fades.

The yen traded at 95.27 per dollar at 10:46 a.m. from 95.25 before the report. Japan’s currency rose as high as 94.88 yesterday, the strongest since June 1, eroding exporters’ profits earned abroad. The Topix stock index fell 0.2 percent.

Cars, Chips

Steel, autos and semiconductors led the export slump. Shipments to China, Japan’s biggest trading partner, fell 29.7 percent, more than April’s 25.9 percent. Exports to Asia slid 35.5 percent from 33.4 percent a month earlier.

Hitachi Construction said this month that sales in China haven’t improved as much as the company had anticipated. The world market for digging equipment will contract by more than a third in the first half of the business year and rebound only 6 percent in the second half, according to company President Michijiro Kikawa.

Exports to the U.S. fell 45.4 percent in May after dropping 46.3 percent in April, the ministry said. Shipments to Europe slid 45.4 percent from 45.3 percent.

Toyota Motor Corp. said yesterday the outlook for car sales in the U.S. remains uncertain. The U.S. economy is forecast to shrink at an annual 2 percent pace in the current quarter and grow 0.5 percent in the next three months.

Production May Wane

The Bank of Japan and the government both said last week that the recession is moderating because companies are increasing production to replenish stockpiles. That rebound in output may wane in the absence of a pickup in exports.

“It’s been widely considered that falling inventories overseas have been supporting Japan’s exports,” said Kato at BNP Paribas. “Even if exports improve in June, they would be around 80 percent of their peak, making it difficult for the economy to expand.”

Central bank Governor Masaaki Shirakawa said this month he’s “cautious” about the prospects for a sustained recovery. Analysts surveyed by Bloomberg predict Japan will resume growing in the three months to June 30 after last quarter’s record annualized 14.2 percent contraction. They said growth will peak at 2 percent next quarter and grind to a halt in 2010.

Imports slid 42.4 percent from a year earlier, and the trade surplus narrowed 12.1 percent to 299.8 billion yen ($3.1 billion), the Finance Ministry said.

“With the world economy in recession it’s a tough story for Japan,” said Jan Lambregts, head of financial markets research at Rabobank International in Hong Kong. “The U.S., the euro zone, the rest of Asia have to recover, and then Japan can benefit.”