Japan's August Export Growth at Slowest Rate this Year

The trade surplus shrank for the first time in 15 months in August from year-earlier levels, down 37.5% to $1.22 billion

Japan's exports grew at their slowest pace this year in August, data showed on Setp. 27, as the impact of a strong yen and softening overseas demand illustrated the risks threatening a fragile recovery.

While demand for steel and automobile-related products saw Japan's exports jump 15.8% to 5.22 trillion yen year-on-year in August, this was below July's 23.5% rise and the slowest pace since December 2009.

"The idea of a V-shaped recovery based solely on the export sector is no longer a credible scenario," said Japan Research Institute chief economist Hidehiko Fujii. "The outlook for the Japanese economy is severe," he told Dow Jones Newswires.

Japan's trade surplus shrank for the first time in 15 months in August from year-earlier levels, down 37.5% to 103.2 billion yen (US$1.22 billion), according to the finance ministry.

Increased imports of crude oil, liquefied natural gas and iron ore lowered the overall surplus despite the rise in exports.

Exports to China, a major driver of the Japanese economy, rose 18.5% to 1.05 trillion yen, while imports from China increased 20% to 1.12 trillion yen.

Japanese exports to the United States rose 8.8% to 776.1 billion yen, while U.S. imports to Japan rose 11.3% to 490.7 billion yen.

Exports to the European Union rose 13.7% to 584.5 billion yen, while imports rose 7% to 502.7 billion yen.

Analysts warn that risks to demand remain as the effects of stimulus measures wane and world leaders embrace tighter fiscal policies to help rebalance a global economy knocked off its axis by the financial crisis.

"The drop in the trade surplus is a sign that the world economy itself is slowing down," said Yuji Shimanaka, chief economist at Mitsubishi UFJ Morgan Stanley Securities. "Exporters expect overseas demand to weaken sooner or later, while they are also threatened by the rapid rise of the yen," he said. Japan stepped into the currency markets in September for the first time since 2004 in a bid to stem the yen's strength after it hit a 15-year high against the dollar, and has repeatedly warned it is ready to do so again.

Japan's economy minister said on Sept. 24 that tensions with China pose "serious" risks to Japan's economy.

Japan-based traders say China has blocked exports of rare earth minerals, essential for Japanese industries manufacturing components used in a variety of sophisticated electronic products including mobile phones and electric cars.

Beijing has also toughened customs clearance procedures, delaying shipment to and from Japan, in what appears to be retaliation over the diplomatic dispute, the The Daily Yomiuri reported on Sept. 27.

Copyright Agence France-Presse, 2010

TAGS: Trade
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