Japan's exports slump for the third month in February

Tokyo

JAPAN'S exports fell for a third month in February in a sign of growing strain on the trade-reliant economy, suggesting the central bank might be forced to offer more stimulus eventually to temper the effects of slowing external demand and trade frictions.

Slowing global growth, the Sino-US trade war and complications over Britain's exit from the European Union have already forced many policymakers to shift to an easing stance over recent months.

Japan is in a similar situation to much of the rest of the world, where factories have slammed on the brakes and business confidence has plummeted in the wake of rising global economic uncertainty.

Ministry of Finance data showed on Monday exports fell 1.2 per cent year-on-year in February, more than a 0.9 per cent decrease expected by economists in a Reuters poll.

It followed a sharp 8.4 per cent year-on-year drop in January, marking a third straight month of falls due to drops in shipments of cars, steel and semiconductor production equipment.

"Exports to advanced nations like the United States and Europe still held firm, but China- and Asia-bound shipments were clearly sluggish," said Takeshi Minami, chief economist at Norinchukin Research Institute.

"Exports will remain in a declining trend for the time being, which could curb capital spending and wages. Domestic economy will face a severe situation ahead of October's sales tax hike." The trade data comes on top of a recent batch of weak indicators, such as factory output and a key gauge of capital spending, which have raised worries that Japan's record run of postwar growth may come to an end.

Some analysts say a recession cannot be ruled out.

The Bank of Japan last week cut its view on exports and output, while keeping policy unchanged. Yet, extended weakness in exports could put it under pressure to deliver more easing, especially as inflation remains well off its 2 per cent target and pressure on businesses and consumers continues to rise.

In the post-policy press conference last week, BOJ Governor Haruhiko Kuroda acknowledged the challenges the economy faced but gave no indication there would be any additional stimulus.

But Mr Kuroda may have to change tack in the face of a run of weak economic indicators.

Seasonally-adjusted overall trade values rose 6.7 per cent month-on-month in February, the strongest rise in two years. REUTERS