TOKYO: Japan’s annual export growth slowed for an eighth straight month in October due to a stronger yen, and a central banker said downside risks to the Japanese economy outweigh upside risks due to uncertainties abroad.
Slowing exports bode ill for an economy bracing for a possible contraction in the final quarter of this year as a temporary boost from stimulus-driven consumption tapers off.
Overseas demand for Japanese goods is likely to pick up again next year and help Japan avoid recession, economists say, but China’s monetary policy tightening, European sovereign debt woes and developments in the US economy pose risks to the outlook.
Bank of Japan (BOJ) board member Seiji Nakamura said exports could recover next year, but he warned of growing risks facing the US and European economies and said he remained on alert for a possible spike in the yen stemming from problems in major economies.
Nakamura sounded less upbeat than Governor Masaaki Shirakawa, who has described risks to Japan’s economy as evenly balanced, suggesting Nakamura would not dissent if the BOJ were to boost its five trillion yen ($59.87 billion) asset-buying scheme in response to a worsening in the economy. “Overall, downside risks (to the Japanese economy) seem somewhat stronger than upside risks,” said Nakamura speaking during a news conference, citing strong uncertainties about the outlook for the US economy.
“There are worries … sovereign debt problems in peripheral Europe could affect the European economy by triggering spikes in bond yields and worsening sentiment,” he said in a speech.
“We tend to think that the economy could rebound as early as January-March, because leading indicators for Japanese exports, such as US new orders, are stabilising,” said Satoru Ogasawara, an economist at Credit Suisse in Tokyo.
Exports rose 7.8 percent in October from a year earlier, the finance ministry said on Thursday, less than the median forecast for a 10.7 percent rise.
Financial markets shrugged off the data. The Nikkei average N225 edged toward a five-month high on demand from overseas investors. Shipments to the United States in October rose 4.7 percent from a year earlier, slower than the previous month’s 10.4 percent, while exports to Europe fell an annual 1.9 percent, the first decline in almost a year as worries about Ireland’s debt burden pushed bond yields higher.
In one positive sign, exports to China, the biggest destination for Japanese goods, rose 17.5 percent from a year earlier, faster than the 10.2 percent annual rise in September due to higher shipments of metal processing machines.
Data on jobless benefit claims and consumer spending suggests the US economic recovery is gaining strength, but a high unemployment rate, weakness in the housing market and a reduction in household debt cloud the outlook.
The BOJ eased monetary policy last month by pledging to keep rates in a range from zero to 0.1 percent until the end of deflation is in sight and announcing a plan to buy assets ranging from government bonds to corporate debt.
The size of the 5 trillion yen asset buying pool now effectively serves as a gauge of the BOJ’s monetary easing. Nakamura was cautious about setting the policy rate at zero, saying it could reduce commercial banks’ incentive to lend and harm the money market.
Shirakawa has said topping up the asset buying plan is a clear option if the looming economic slowdown proves worse than expected. But the yen’s retreat from 15-year highs scaled early this month makes any radical near-term action unlikely.
Japan’s economy grew a solid 0.9 percent in the third quarter as expiring government incentives gave consumption a last-minute boost before a long-anticipated slowdown.
