Very bullish. green shoots everywere Japanâs Export Slump Deepens, Signaling Weak Recovery (Update2) Share | Email | Print | A A A By Aki Ito and Toru Fujioka Aug. 26 (Bloomberg) -- Japanâs export slump deepened in July, indicating the boost in demand that helped pull the country out of its recession last quarter may be short-lived. Shipments abroad fell 36.5 percent from a year earlier, steeper than Juneâs 35.7 percent drop, the Finance Ministry said today in Tokyo. The median estimate of 23 economists surveyed by Bloomberg News was for a 38.4 percent decrease. Overseas shipments were the main driver of Japanâs 3.7 percent annualized growth last quarter as governments worldwide poured more than $2 trillion into their economies to spur demand. Weakness in exports may weigh on an economy where consumers at home are paring spending amid near-record unemployment and unprecedented drops in wages. âExports are very likely to run out of steam soon,â said Takahide Kiuchi, chief economist at Nomura Securities Co. in Tokyo. âJapan wonât be able to undergo a solid recovery until the end of next year.â The yen traded at 94.05 per dollar at 9:13 a.m. in Tokyo from 94.04 before the report was published. Companies are still reeling from a collapse in demand that caused shipments to drop at an unprecedented rate earlier this year. Nippon Steel Corp., the worldâs second-largest steelmaker, last month widened its first-half loss forecast by 33 percent. Toyota Motor Corp., Japanâs largest automaker, and Nissan Motor Co., the third biggest, led a ninth straight drop in domestic auto production in June as exports to the U.S. plummeted, according to the Japan Automobile Manufacturers Association. âSomewhat Shakyâ âThe U.S. hasnât quite recovered, and Chinaâs economy looks somewhat shaky too,â said Junko Nishioka, chief economist at RBS Securities Japan Ltd. in Tokyo. âWeâre unlikely to see a recovery in exports in the short-term.â Toyota said today it is cutting its production capacity in Japan. The Toyota City-based carmaker will halt a production line at its Takaoka plant from 2010 to 2011, cutting output by 220,000 vehicles. Exports may also have been eroded by the yenâs 1.7 percent advance against the dollar in July compared with a year earlier, according to Masayuki Kichikawa, chief Japan economist at Merrill Lynch & Co. in Tokyo. A stronger yen cuts into exportersâ profits when they are repatriated back into local currency. Not all economists believe exports will continue to worsen. Robust growth in China, which overtook the U.S. as Japanâs largest overseas customer this year, will support demand, according to economist Kyohei Morita. Keep Rising âWe do not believe a drop in exports would mark the start of downward trend,â said Morita, chief economist at Barclays Capital in Tokyo. âExports, especially to Asia and the U.S., are likely to continue rising.â Chinaâs economy grew 7.9 percent last quarter, rebounding from the weakest growth in almost a decade. The nationâs 4 trillion yuan ($585 billion) stimulus to encourage consumer spending and investment in building projects has benefited Japanese manufacturers. The Bank of Japan will release a report later today showing trade volumes on a month-on-month basis, data which correlates closely with the export component of gross domestic product, according to London-based Capital Economics Ltd. To contact the reporter on this story: Aki Ito in Tokyo at aito16@bloomberg.net; Toru Fujioka in Tokyo at tfujioka1@bloomberg.net Last Updated: August 25, 2009 20:16 EDT