Japan exports shrink as global downturn hits Asia

By Leika Kihara

TOKYO (Reuters) - Japan's exports unexpectedly shrank in June for the first time in nearly five years as shipments to Asian 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.

Shipments to the United States and Europe shrank at the fastest pace since 2003 and 2002, respectively, as auto sales tumbled.

China and other emerging markets have largely escaped the initial impact of the global credit crisis triggered by U.S. mortgage defaults. But with Asia'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 percent in June from a year earlier, marking the first fall in 55 months. Economists who had forecast a 3.8 percent rise.

CHINA, INDIA, BRAZIL