U.S. Markets

Japan exports fall more than expected, eyes on BOJ review

TOKYO (Reuters) - Japan’s exports fell in August for a 11th consecutive month due to the yen strength and sluggish overseas demand, in a sign that an export-reliant economy may struggle to accelerate in the current quarter.

A worker takes a break at a container yard at Ooi Wharf in Tokyo November 21, 2008. REUTERS/Yuriko Nakao/File Photo

Ministry of Finance (MOF) data showed on Wednesday that exports fell 9.6 percent in the year to August, dragged down by shipments of cars and steel. The year-on-year fall was bigger than a 4.8 percent drop expected by economists in a Reuters poll, following a 14.0 percent decline in July.

The data underscored a dominant market view that any growth in the world’s third largest economy would be moderate in July-September, offering little solace to the Bank of Japan, which concludes its two-day policy meeting later on Wednesday.

With growth lacking strength and inflation undershooting the Bank of Japan’s 2 percent goal, many analysts in a Reuters poll expect the BOJ to ease further on Wednesday when it announces results of comprehensive review of its stimulus.

“Exports lacked momentum, although they were not so weak as the headline figure suggested. On average they were largely flat or on a gradual recovery,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.

“Given the yen’s gains, however, exports would likely struggle to accelerate ahead,” he said.

The MOF data showed exports to China - Japan’s largest trading partner - fell 8.9 percent in the year to August, marking the sixth straight month of annual declines.

Shipments to Asia, which accounts for more than half of Japanese exports, fell 9.4 percent, led by South Korea-bound shipments of steel. It was the 12th straight month of falls.

U.S.-bound exports fell 14.5 percent, hurt by declines in car shipments, while exports to European Union fell 0.7 percent.

Imports fell 17.3 percent in the year to August, versus the median estimate for a 17.8 percent annual decline, as the yen’s gains and dip in oil prices lowered import costs.

The trade balance swung to a deficit of 18.7 billion yen ($183.91 million), versus the median estimate for a 202.3 billion yen surplus. It was the first trade deficit in three months.

Japan’s economy grew at an annualized rate of 0.7 percent in April-June, slowing from the prior quarter’s 2.1 percent growth, led by leap year effects, as exports and capital spending fell.

The Reuters poll of economists showed the economy was likely to expand an annualized 0.7 percent in the current quarter and 0.6 percent in the final three months of this year.

($1 = 101.6800 yen)

Reporting by Tetsushi Kajimoto; Editing by Eric Meijer