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Japanese exports to U.S. tumble by 22%

September 26, 2008
By Jonathan Stoble, Financial Times

Japanese exports to the US tumbled by a record 22 per cent last month, pushing the country's trade balance into a rare deficit and bolstering the view that its economy may have slid into recession.

The fall, revealed by government data yesterday, underscores how the sharp decline in US consumer demand is squeezing the nation's trade partners.

"This reflects the pervasiveness of the problems facing the global economy," said Ian Bright, analyst at Pali International.

The contraction was led by plunging sales of Japanese cars and trucks in a weak US automobile market. Exports to Europe also declined while growth in shipments to China and other Asian countries - including sales of Japanese factory equipment used in those countries' own export industries - slowed sharply.

The total value of Japanese exports in August edged up by 0.3 per cent, but that was down from an 8 per cent growth rate in July. Export volume shrank by 3.1 per cent. Japan's import bill, meanwhile, jumped by 17 per cent owing to record-high oil prices, resulting in a deficit of Y324bn ($47.5bn, €32bn, £26bn).

Japan's trade balance occasionally slips into negative territory at the start of the year as production slows over its long new year holiday. But economists said August's deficit was the first outside the month of January in 26 years, and the first on a seasonally adjusted basis since 1980.

Japan has suffered few direct effects from the mortgage crisis that has gripped the US and Europe, but rising food and energy prices have depressed already chronically weak consumer spending and left the economy particularly vulnerable to an export slowdown.

Gross domestic product shrank by 3 per cent in annualised terms in the second quarter, and analysts said the current quarter looked increasingly likely to produce a contraction.

Taro Aso, Japan's new prime minister, has promised to move quickly to pass an Y11,700bn supplementary budget that includes Y1,800bn in fresh spending designed to help small businesses and shore up the economy.

But economists say the package is too small to have much of an impact on Japan's Y500,000bn economy.

Exports to China, Japan's largest trade partner, grew by 8.8 per cent in August. That was down from 16.5 per cent in July and below the 10 per cent average growth rate for the year. Exports of cars and other transport machinery to the US declined by 30 per cent in the month.