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Japan export growth slows to underline yen woes

TOKYO (Reuters) - Japan’s annual exports growth slowed in August for the sixth straight month, underlining government concerns about the yen’s strength that led authorities to sell the currency this month to ease pressure on the economy.

Workers ride bicycles as a guard looks on at a factory in Keihin industrial zone in Kawasaki, south of Tokyo August 31, 2010. REUTERS/Toru Hanai/Files

The Bank of Japan may follow up the government-ordered intervention by easing already ultra-loose monetary policy next week as policymakers try to stop a recovery from stalling.

They have also warned that a deepening territorial row with China, Japan’s top export market, has affected bilateral trade and could add to the economic woes.

“We still face the risk of a double-dip recession,” said Takahide Kiuchi, chief economist at Nomura Securities in Tokyo.

“There is a possibility that both exports and production data will stay weak in July-September and that GDP could slightly fall in October-December.”

Exports in August rose 15.8 percent from a year earlier, below expectations for a 19.0 percent gain, Ministry of Finance data showed on Monday. Growth was much weaker than the 2010 peak rate of 45.3 percent in February.

Graphic of export growth, click link.reuters.com/cyv45p

U.S. exports increased 8.8 percent from a year earlier, much weaker than a 25.9 percent rise the previous month, hit by a slowdown in shipments of cars.

Annual exports growth to Asia, which accounts for more than half of Japan’s total exports, slowed to 18.6 percent from 23.8 percent in July’s data. Exports to China rose 18.5 percent, below 22.7 percent in July.

That left a trade surplus of 103.2 billion yen ($1.23 billion), down 37.5 percent from a year earlier and the first decline in 15 months. The surplus had been expected to rise by 44.3 percent.

MOUNTING ECONOMIC CONCERNS

Japan’s annualised economic growth rate braked hard to just 0.4 percent in the April-June quarter from 4.4 percent in the January-March period.

With growth slowing, a 9 percent rise in the yen against the dollar this year has raised alarm bells in Tokyo.

The yen hit a 15-year high against the dollar below 83 yen on Sept. 15, prompting the first official intervention in over six years. It fell to 85.94 per dollar after intervention but has since drifted higher again to trade on Monday around 84.26.

The Bank of Japan could well loosen its policy next week. Sources said it will be prepared to act if the recovery is under threat. The BOJ reviews policy on Oct. 4-5.

Adding to Tokyo’s concerns about the economic outlook, a dispute with China over a shipping collision is spreading into trade, Japan’s Mainichi newspaper reported on Monday.

It said some customs offices in China have started stricter checks on shipments to and from Japan, causing delays in what may be a retaliatory act after Japan detained the skipper of the Chinese trawler that collided with Japanese patrol boats near islands claimed by both countries.

The skipper was allowed to return to China on Saturday.

An index measuring export volumes rose in August by 14.4 percent to 95.0 from a year earlier, its ninth straight monthly rise. The index is still below July’s index of 109.4, which was the highest level since October 2008.

The export volume index to Asia was 120.7, up 15.1 percent from a year earlier but down from July’s 131.8.

(Editing by Michael Watson and Neil Fullick)

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