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Japan's Sept export growth slows sharply, adds to recession fears

Japan's exports rose 0.6 per cent in September from a year earlier, much slower than the prior month's gains, reflecting a slowdown in top trading partner China, Ministry of Finance data showed on Wednesday.

[TOKYO] Japan's annual export growth slowed for the third straight month in September, a worrying sign that overseas sales continued to drag on growth last quarter, adding to fears of a recession.

Ministry of Finance data showed exports rose just 0.6 per cent in the year to September, against a 3.4 per cent gain expected by economists in a Reuters poll.

That was the slowest growth since August last year and followed a 3.1 per cent gain in August 2015. Compared with last month seasonally-adjusted shipments declined 1.7 per cent.

Wednesday's data is the first major indicator for September and is part of the calculation of third quarter gross domestic product. A third quarter contraction would put Japan into recession, given the second quarter's negative GDP data.

China's slowdown and soft domestic demand weighed on factory output and the broader economy, although the Bank of Japan saw the effects of China's slowdown were limited for now, as it sticks to its rosy growth outlook, but that may change at the BOJ's monetary policy review on Oct 30.

Data out on Monday showed China's economic growth dipped below 7 per cent for the first time since the global financial crisis despite a barrage of stimulus measures.

Analysts worry that a China-led global slowdown could drag down the Japanese economy, keeping Tokyo under pressure to deploy fresh monetary and fiscal stimulus in the coming months.

"China-bound exports fell for a second straight month in terms of value and volume, that weighed on exports," a finance ministry official said. "We must pay the utmost attention to China." Exports to China fell 3.5 per cent in September from a year earlier, down for a second straight month and weighed by falling shipments of light oil and car parts.

Shipments to Asia - which account for about a half of Japan's overall exports - fell 0.9 per cent in the year to September. That was the first decline in seven months.

Exports to the United States, a major buyer of Japanese products, rose 10.4 per cent in September, led by brisk shipments of cars. That followed a 11.1 per cent annual gain in August.

Reflecting ongoing falls in oil prices, imports fell 11.1 per cent in the year to September, largely in line with economists' estimates.

The trade balance was a deficit of 114.5 billion yen (S$1.33 billion), versus an 84.4 billion yen surplus seen by economists, marking six straight months of deficits.