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UPDATE 1-Japan exports fall but firms' mood improves amid recovery hopes
March 21, 2013 / 12:40 AM / in 5 years

UPDATE 1-Japan exports fall but firms' mood improves amid recovery hopes

* Japan logs 8th month of trade deficit in Feb
    * Exports -2.9 pct yr/yr, imports +11.9 pct yr/yr
    * Company mood up on buoyant share prices, weaker yen
    * Weak yen boosts import costs, hurts trade balance for now

    By Tetsushi Kajimoto
    TOKYO, March 21 (Reuters) - Japanese exports fell in
February from a year earlier, but confidence among Japanese
manufacturers improved for the fourth consecutive month in a
sign that the economy is slowly recovering from last year's
recession.
    Ministry of Finance data showed exports fell 2.9 percent in
February from a year earlier, more than a 1.9 percent drop
expected by economists in a Reuters poll, after a revised 6.3
percent rise in January.
    Analysts say it will take time for the yen's slide to
3-1/2-year lows, which has been driven by Prime Minister Shinzo
Abe's push for aggressive monetary easing and fiscal pump
priming, to feed through to improved exports even though it
immediately raises the price of imports.
    But the policy mix aimed at ending nearly two decades of
deflation and dubbed "Abenomics" is already boosting corporate
morale. 
    A Reuters monthly poll, which is closely correlated with the
Bank of Japan's quarterly tankan corporate survey, showed
manufacturers' sentiment index rose by 2 points to minus 11 in
March and was expected to swing to plus 4 in June.
    "The trade data shows the pace of improvement in exports is
slower than previously expected. The yen's weakness is likely to
have an impact on export volumes gradually from the March and
April data towards summer," said Yoshimasa Maruyama, chief
economist at Itochu Economic Research Institute in Tokyo. 
    "The Reuters Tankan shows a pick-up in corporate sentiment
for both manufacturers and non-manufacturers on the back of
higher share prices," he said.
    A negative reading in the poll means there are still more
pessimists than optimists, but the March 4-18 survey of 400
firms of which 250 responded, shows the gap has been steadily
narrowing since the end of 2012.
    
    
    Economists say the currency's weakening tends to weigh on
Japan's trade balance at first, as its effect of boosting the
value of imports is immediate while it takes longer before the
impact is reflected in prices and volumes of exports.
    The drop in exports was also due in part on the timing of
the Chinese New Year, which this year was in February and dented
Japan's shipments to China from a year before when the holidays
were observed in January.

    TRADE DEFICIT
    Imports rose 11.9 percent in the year to February, a fourth
straight increase but below expectations of a 15.1 percent rise,
leaving the trade balance in a deficit for the eighth
consecutive month.
    The 777.5 billion yen ($8.14 billion) deficit was narrower
than the 836 billion yen deficit expected by economists, but was
still the largest on record for the month of February.
    For decades, Japan had accumulated solid trade surpluses,
but its trade balance swung to a deficit in 2011 and 2012 after
the Fukushima crisis two years ago forced the nation to idle its
nuclear power plants and import more oil and gas.
    Economists expect Japan will return to a moderate economic
recovery this year on improved global demand and on Abe's fiscal
and monetary stimulus.
    Expectations are high the Bank of Japan may boost its
government bond purchases at its April 3-4 policy review, the
first under new Governor Haruhiko Kuroda, who has vowed to do
whatever it takes to hit the BOJ's new 2 percent inflation
target.

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