Japan's export fall less severe as recession eases

TOKYO - Japan's exports in June fell by the smallest margin in six months, adding to evidence that global demand is recovering as the recession loosens its grip.

Shipments from the world's second-biggest economy fell 35.7 percent from a year earlier, an improvement from a 40.9 percent decline in May, the government said Thursday. Exports have fallen every month since October.

As a result of a bigger fall in imports, Japan posted a trade surplus of 508 billion yen ($5.4 billion) — the highest value since March 2008, according to the Ministry of Finance.

Export declines eased in all of Japan's major markets, particularly China. Huge stimulus spending by Beijing helped Chinese growth accelerate in the second quarter, expanding by 7.9 percent from a year earlier.

Exports to Asia and the U.S. are showing the clearest recovery, said Richard Jerram, chief economist at Macquarie Securities in Tokyo.

"The former probably reflects the performance of the regional economies, most notably China, and also a revitalization of global production chains," he said in a report.

It's much-needed good news for the Japanese economy, which relies heavily on the world to buy its cars and gadgets. The unprecedented plunge in global demand that followed last year's global financial crisis sent Japan into its steepest recession since World War II.

Gross domestic product contracted at a record annualized pace of 14.2 percent in the first quarter. But Japan's central bank predicts the economy will begin growing again in the second half of this fiscal year through March 2010.

Asia-bound shipments fell 30.1 percent, while exports to China alone declined a less severe 23.7 percent.

Export declines to the United States also improved, falling 37.6 percent compared to a 45.4 percent decline in May, the ministry said. U.S.-bound auto exports were down 41.4 percent and those of electric machinery dropped 31.6 percent.

Japan's exports to the European Union decreased 41.4 percent in June, the ministry said.

Overall exports in June stood at 4.6 trillion yen ($49.2 billion). Imports fell by 41.9 percent to 4.1 trillion yen ($43.8 billion).

Along with economic developments, volatile foreign exchange rates could weigh on an emerging export recovery in the months ahead, analysts say.

A stronger yen decreases the value of exporter profits when repatriated to Japan, and makes Japanese products more expensive overseas. Many exporters have based their fiscal year profit forecasts on the assumption of an exchange rate of 95 yen to the dollar.

Kyohei Morita, chief economist at Barclays Capital in Tokyo, says companies so far are holding their own against a stronger yen.

"While the current rate of around 94 obviously creates difficulty for Japanese exporters, it should not be a level that immediately cuts into profitability," Morita said. "In this light, we believe the turnaround in exports will be both sustainable and profitable."

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