Wednesday, June 24, 2009

The Debts of the Lenders: Japanese Exports Collapse

Govt attempts to pump the Nikkei by issuing rosy interpretations of grim data are meeting stiff challenges. Insiders speak of large sell blocks around the 9k-11k levels. As an export oriented nation, Japan also needs a cheaper yen. But the macro story speaks otherwise.

Although the yen has weakened significantly since early February, it has since retraced and is making headway into a potentially bullish consolidation longer term. Forex analysts speak of the yen strengthening to as much as 90 against the dollar although it is likely that the BOJ will intervene around the psychologically important 95 level.

=DJ 2nd UPDATE: Japan May Exports Fall Sharply; Optimism Intact

(Adds comments from BOJ Gov. Shirakawa)


TOKYO (Dow Jones)--Japanese exports fell slightly more sharply in May than in the previous month on sluggish demand for cars, steel and electronic parts, but economists maintained that sales of Japanese goods overseas remain in a recovery trend.

The value of exported goods dropped 40.9% on the year in May, sharper than April's 39.1% fall and marking the eighth straight month of declines, data released Wednesday by the Finance Ministry showed.

Japan's merchandize trade surplus - the margin by which exports exceed imports - slid 12.1% on the year to stand at Y299.8 billion in May. But the figure was the largest in a year, and beat economists' forecasts of a Y214.6 billion surplus.

During May, exports of automobiles decreased by 60.9%, steel by 49.5% and electronic parts such as computer chips fell 33.5%, according to the data. Shipments to the U.S., Asia and the European Union all slipped.

The latest figures come after the pace of the decline in exports slowed successively in March and April, following February's record drop of 49.4%.

Still, economists warned against undue pessimism.

Last May had two fewer business days than the same month a year earlier, making the decline inevitable to some extent, they said. The value of total exports was in fact down only 0.3% from April when adjusted for seasonal factors, they said.

Moreover, overseas companies that have cleared their shelves are expected to resume buying Japanese goods as they restock, they added.

Bank of Japan Gov. Masaaki Shirakawa said Wednesday that the country's exports are gradually "turning around", while Japan's broader economy is bottoming out.

"Worldwide inventory adjustments have almost run their course, so we should see a clear improvement in exports during the April-June quarter," said Toshihiro Nagahama, chief economist at Dai-Ichi Life Research Institute. Stimulus steps taken by overseas governments are also expected to benefit Japan's exports by lifting demand abroad, he said.

Any pickup in foreign demand would be great news for an export-reliant Japanese economy that is trying to crawl out of its worst recession since World War II.

Yet, the longer-term prospects of exports remain murky, said Azusa Kato, an economist at BNP Paribas. Given continued weakness in global consumer demand, Japanese exports could face another phase of weakness "once the effects of stimulus action (by overseas governments) fade away and foreign firms finish rebuilding inventories," she said.

Some analysts, meanwhile, have been looking for any signs that Beijing's recent "buy China" directive for local government procurement is having any impact on Japanese trade. But even though Japan's exports to China fell 29.7% in May, a Japanese finance ministry official said it is hard to tell yet whether the decline had anything to do with the Chinese policy.

The value of imports fell 42.4% on the year in May, the data showed, a larger fall than in April and the seventh straight month of decline. Imports of crude oil fell by 63.1%, nonferrous metals by 74.7% and liquid natural gas by 51.4%, according to the data.

Whether the sliding imports spell trouble, however, is open to debate.
BNP Paribas' Kato took that as evidence of lackluster domestic demand. But Dai-Ichi Life Research Institute's Nagahama argued otherwise, saying a combination of improving exports and falling imports is a positive pattern often seen when the economy is emerging from a slump.
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