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Japan exports tumble in April, recovery seen

Tokyo, May 25, 2011

Japanese exports tumbled in April from a year earlier as expected, dragged down by a slump in carmakers' output after the March 11 earthquake, but analysts see the first signs that the economy is bottoming out as manufacturers continue to restore production capacity.

The data reinforced the view that the world's third-largest economy is heading for a third straight quarter of contraction in April-June but will probably return to growth in the following quarter, in line with the Bank of Japan's scenario, meaning the central bank would probably refrain from further policy easing.

BOJ Governor Masaaki Shirakawa has said the central bank was ready to ease policy further if the impact of the quake proves more severe than expected and threatens the return to a moderate economic recovery around the autumn.

Minutes of the BOJ's April 28 meeting showed that one board member saw a rising need for more easing, joining Deputy Governor Kiyohiko Nishimura in moving toward further action. But Nishimura's proposal for boosting the BOJ's asset buying was rejected by a one-to-eight vote and the deputy governor did not repeat the proposal at a subsequent meeting in May.

"If you look at the month-on-month decline in exports, it is slowing. Carmakers are likely to be able to increase production soon, so when compared to the previous month, exports could bottom out in May. Other manufacturers are also taking steps to gradually restore their output," said Shunji Tonouchi, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities.

Exports fell 12.5 per cent from a year earlier, roughly matching a median forecast for a 12.4 per cent annual decline and following a 2.3 per cent drop in March, government data showed.

In seasonally adjusted month-on-month terms, exports fell 5.5 per cent in April after an 8.3 per cent drop in March.

"Exports are likely to continue falling on a year-on-year basis until the autumn. Still, the recovery in production and exports is likely to proceed in line with the Bank of Japan's thinking, so this may not factor much into a change in policy," Mitsubishi UFJ's Tonouchi said.

Imports rose 8.9 per cent in the year to April, less than a 12.3 per cent rise forecast by economists, suggesting that reconstruction demand has not yet kicked in as much as expected while domestic demand is weak.

The trade balance swung into a deficit of 463.7 billion yen ($5.7 billion), the first deficit in three months and the first shortfall for the month of April since 1980, when Japan was hit by the oil crisis.

Shipments to China declined an annual 6.8 per cent, the first annual drop since October 2009, while shipments to the US fell 23.3 per cent.

Analysts expect Japan to log a trade deficit in the second quarter due to the disaster, as radiation leaks at a tsunami-hit nuclear power plant led some countries to halt imports of Japanese goods, but they project the balance will return to the black in the fourth quarter as supply constraints ease.

Japanese automakers, the main engine of the nation's export-led economy, have slashed production since the magnitude 9.0 earthquake due to a shortage of supplies from damaged parts makers, a few dozen of which are still considered in critical condition.

The triple disaster of earthquake, tsunami and nuclear crisis nudged Japan into recession and led to a surprisingly deep 0.9 per cent contraction in January-March, with analysts expecting the economy to shrink again in the second quarter. – Reuters




Tags: Central Bank | Exports | Japan | earthquake | Tokyo | April |

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