Japan exports in October surge more than expected on weak yen

Tokyo

JAPAN'S exports rose much more sharply than expected in yen terms during October - up by 9.6 per cent to just over 6.9 trillion yen (S$76 billion), the highest monthly level in six years - aided by a weaker yen and firm demand from the US market in particular, it was announced on Thursday.

The yen, meanwhile, continued its plunge, falling to a new seven-year low of 118.63 to the US dollar at one point during Tokyo trading as analysts predicted continuing strength in Japanese export values in coming months.

News of the jump in exports, which reduced Japan's goods trade deficit by 36 per cent to 710 billion yen in October compared with the level a year ago, came as a welcome development following this week's announcement that the economy slid into recession in the third quarter of this year.

Meanwhile, Reuters reported that "in another sign that the world's third-largest economy is regaining its footing", a private flash survey showed that factory output in Japan has grown in November at its fastest pace since March.

The fact that exports rose in October, at double the consensus rate forecast by economists, will also be good news for Prime Minister Shinzo Abe as he prepares to take his ruling Liberal Democratic Pary into a snap general election next month, laying his political career on the line, analysts said.

The yen dropped by 10 per cent against the US dollar in October compared with its level a year earlier and the rate of decline has since accelerated as the Bank of Japan has stepped up its aggressive monetary easing. Dealers say the yen could fall below 120 to the dollar although that could invite official intervention.

The currency's decline appears to be having beneficial impact on Japan's exports to the US in particular, a trend which appears likely to continue given that the dollar has entered a "long-term bull market", former Goldman Sachs Asia vice-president Kenneth Courtis told The Business Times.

Japan's shipments of goods to the US, where the economy has been on a recovery track, rose by 8.9 per cent in October to 1.27 trillion yen while imports from the world's largest economy rose by 11 per cent to 654 billion yen, Kyodo news service reported. Exports to China - Japan's biggest single trade partner - expanded by 7.2 per cent to 1.23 trillion yen in October while imports from there rose by 9.6 per cent to 1.82 trillion yen.

Shipments to the EU meanwhile grew by 5.4 per cent to 682 billion yen, while imports rose 4.9 per cent to 699.7 billion yen.

The outlook for trade with China was clouded on Thursday, however, by news that according to a private survey quoted by Reuters, Chinese output fell for the first time in six months during October. This added to concerns about slowing economic momentum.

Japan's balance in goods trade remained in deficit for the 28th consecutive month in October, the longest period since comparable data became available in January 1979.

While exports climbed on the back of a 6.2 per cent rise in vehicle shipments, imports also rose by 2.7 per cent to 7.4 trillion yen owing largely to a 30 per cent increase in imports of communication devices, the Ministry of Finance said in a preliminary report.