Japan exports soar at fastest pace for 30 years

February 24, 2010
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, TOKYO, Feb 24 – Japan on Wednesday said exports grew at the fastest pace for 30 years in January, supporting recovery as the world\’s second largest economy battles deflation and weak domestic demand.

Posting a surprise trade surplus, Japan said exports soared at their fastest pace since February 1980 at 40.9 percent to 4.90 trillion yen, backed by a rebound in demand from the rest of Asia as well as from developed countries.

"Exports continued to recover robustly, led by shipments for Asia," said Daiwa Institute of Research economist Hiroshi Watanabe, warning that due to its weak domestic demand "Japan\’s economy can only count on exports."

Japan plunged into its most severe post-war recession in 2008 as its exports collapsed due to the global downturn, returning to growth in the second quarter of 2009.

But the recovery remains fragile with falling consumer prices, high public debt and weak domestic demand all major concerns for policymakers.

Wednesday\’s data showing a surplus of 85.2 billion yen (945 million dollars) beat market expectations of a deficit of 145 billion yen and reversed a record deficit of 956 billion yen recorded during the slump a year ago.

The figures showed that Japan\’s trade surplus with the United States and the European Union has widened and its deficit with China has narrowed.

Higher US demand for final products led to a boost in exports of parts and raw materials to China, where many of the products are manufactured, he said.

Exports to Asian powerhouse China, which overtook the US as Japan\’s top export market in 2009, surged 79.9 percent to 920.0 billion yen on higher demand for semiconductors and other components, automobiles and plastics.

Prospects for China\’s economy will remain key for Japan, said Takeshi Minami, chief economist at Norinchukin Research Institute.

"China has shifted to credit tightening, which would slow its economy and reduce exports from Japan," he said. "We need to watch developments in China."

Exports to the United States rose 24.2 percent to 710.4 billion yen to chalk up the first rise in 29 months, with automobile exports more than doubling.

Japan\’s overall imports rose 8.6 percent to 4.82 trillion yen. Economists said the rise, the first in 15 months, reflected higher energy prices rather than improving domestic demand.

The export rises led Japan to score a 78.7 percent jump to 237.1 billion yen in its trade surplus with the United States and to cut its deficit with China by 76.8 percent to 130.6 billion yen.

Japan\’s trade surplus with the European Union more than tripled to 92.1 billion yen from the year-before surplus of 27.8 billion yen.

The trade data was released a day after Toyota, the country\’s biggest exporter, reported a rise in global sales despite its safety defect troubles, which have sparked mass recalls and production stoppages.

Toyota\’s global sales in January were up 15.3 percent year-on-year, with exports surging 43.5 percent.

Minami said an impact of Toyota\’s recall crisis on the whole of the Japanese economy would be limited as the automaker has already been producing vehicles locally in the United States.

However, Daiwa\’s Watanabe warned Japan\’s economy would be weighed down if the Toyota crisis leads to public distrust in all Japanese cars.

"The auto industry is the industry that has the strongest potential of affecting other industries, ranging from parts to services companies," he said. "If the top of a pyramid collapses, it would damage its base."
 

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