UPDATE 1-Japan exports fall for third month as global economy slows
* Exports -5.8 pct in Aug yr/yr vs -7.3 pct expected * Global slowdown, friction with China cloud outlook * Manufacturing mood at lowest since Feb as exports struggle By Tetsushi Kajimoto TOKYO, Sept 20 (Reuters) - Japan's exports fell for a third straight month in the year to August while manufacturing sentiment hit its lowest since February - more evidence that slackening global demand is taking its toll on the export-reliant economy. Exports fell 5.8 percent in August from a year earlier, against a 7.3 percent drop expected by economists, after posting the sharpest fall in six months in July, government data showed. Separately, Japanese manufacturers' sentiment hit its lowest since February and is expected to stay negative in the months ahead, a Reuters poll showed, with the global slowdown and a territorial row with China seen weighing on the world's third-largest economy. The decline in exports was less than expected, but this news will do little to ease concerns that the fading effects of rebuilding after last year's massive earthquake and tsunami are likely to keep policymakers under pressure to dish out further stimulus. The Bank of Japan boosted its asset buying and lending scheme by 10 trillion yen on Wednesday and its governor Masaaki Shirakawa warned economic recovery could get delayed by six months. "External demand will likely remain weak and I would not rule out the possibility that Japan will continue to post a trade deficit in the next fiscal year," said Takeshi Minami, chief economist at Norinchukin Research Institute. "The BOJ is expected to stand pat in October after easing yesterday. But I don't deny there's a chance the central bank will need to ease again at the year-end or early next year." Exports to China, Japan's top market, fell 9.9 percent in the year to August, while those to the United States, the No. 2 export destination for Japan, rose an annual 10.3 percent, Ministry of Finance data showed. The trade balance came to a deficit of 754.1 billion yen ($9.63 billion) in August, against a 809.0 billion yen gap expected. It was the second straight month of trade deficits, in a worrying sign that Japan's ability to finance its debt may be gradually waning. In a sign of the troubles facing Europe from its debt crisis, Japan's trade deficit with the European Union swelled to a record 96.2 billion yen in August, finance ministry data showed. In the Reuters Tankan for September, the manufacturers' sentiment index, derived by subtracting the percentage of pessimistic responses from optimistic ones, fell one point to minus 5, and it is expected to stay negative in December. Japan's economic growth slowed to 0.2 percent in April-June, with exports struggling and private spending losing momentum, and analysts project growth could stall for the rest of 2012 given Europe's debt crisis and a slowdown in China. Sluggish readings in the Reuters Tankan, which closely correlates with the Bank of Japan's quarterly tankan corporate survey and growth trends in the economy, does not bode well for the BOJ poll due out on Oct. 1.
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