•Japan's Export Slump Accelerates, Extending Worst Trade Decline Since WWII

Japan’s Trade Slump Deepens as Exports Tumble 41% (Update1)
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By Jason Clenfield

June 24 (Bloomberg) -- Japan’s exports fell at a faster pace in May, extending the nation’s deepest trade slump since World War II.

Shipments abroad dropped 40.9 percent from a year earlier, more than April’s 39.1 percent decline, the Finance Ministry said today in Tokyo. The median estimate of economists surveyed was for a 39.3 percent decrease. From a month earlier, exports fell 0.3 percent, the first deterioration since February.

The Nikkei 225 Stock Average has fallen 6 percent since reaching a nine-month high on June 12 amid concern the recovery may be weaker than anticipated. Stimulus measures in China haven’t been enough to offset sales declines in the U.S. and Europe for companies such as Hitachi Construction Machinery Co.

“The question remains: will this be a typical recovery in terms of the magnitude of the rebound?” said David Cohen, director of Asian economic forecasting at Action Economics in Singapore. “The pessimists say there are still headwinds from lingering financial stress in a lot of places.”

The yen fell to 95.33 per dollar at 9:04 a.m. from 95.25 before the report. Japan’s currency rose as high as 94.88 yesterday, the strongest since June 1, eroding exporters’ profits earned abroad. The Nikkei opened 0.5 percent higher.

Surplus Narrows

Imports slid 42.4 percent from a year earlier, and the trade surplus narrowed 12.1 percent to 299.8 billion yen ($3.1 billion), the ministry said.

Bank of Japan Governor Masaaki Shirakawa said this month that, although the recession probably bottomed last quarter, he is “cautious” about the prospects for a sustained recovery.

Analysts surveyed by Bloomberg predict growth will resume in the current quarter after the economy shrank a record annualized 14.2 percent in the previous period. Growth will peak at 2 percent in the third quarter and grind to a halt in 2010, analysts said.

“With the world economy in recession it’s a tough story for Japan,” said Jan Lambregts, head of financial markets research at Rabobank International in Hong Kong. “The U.S., the euro zone, the rest of Asia have to recover, and then Japan can benefit.”

The World Bank this week downgraded its forecast for global growth, saying the world economy will shrink 2.9 percent this year, worse than the 1.7 contraction predicted in March. Fewer capital inflows and less direct investment will mean “increasingly grave prospects” for developing nations, the lender said.

Toyota’s Outlook

Toyota Motor Corp. said yesterday the outlook for car sales in the U.S. remains uncertain. The U.S. economy, Japan’s biggest export market, is forecast to shrink at an annualized 2 percent rate in the current quarter and grow only 0.5 percent in the next three months.

Nor has China’s recovery been enough to revive earnings for Japan’s exporters. Hitachi Construction said this month that sales in China haven’t improved as much as the company had anticipated. The world market for digging equipment will contract by more than a third in the first half of the business year and rebound by only 6 percent in the second half, according to company President Michijiro Kikawa.

To contact the reporter on this story: Jason Clenfield in Tokyo at jclenfield@bloomberg.net
Last Updated: June 23, 2009 20:09 EDT