Pressure Mounts on Bank of Japan as November Exports Fall


Japan's exports fell for a sixth straight month in November from a year earlier, adding yet more pressure on the Bank of Japan to vigorously expand monetary stimulus.

November's 953.4 billion yen ($11.4 billion) trade deficit was the largest in 10 months as Europe's sovereign debt crisis and a sharp drop-off in exports to China hit external demand and nudged Japan's economy, the world's third-largest, into recession earlier this year.

Finance Ministry data published on Wednesday showed a 4.1 percent annual drop in exports, following a 6.5 percent year-on-year decline in October, but a smaller fall than the median 5.4 percent annual decline forecast in a Reuters poll of economists.

The weak data plays into the hands of incoming Prime Minister Shinzo Abe, who has campaigned for more aggressive monetary action to energise the economy.

The data was published as the Bank of Japan started its December meeting, and it is widely expected to announce new stimulus measures on Thursday - with the case for extra policy support stoutly reinforced by the trade figures.

Japan's exports to China fell 14.5 percent in the year to November, the sixth consecutive month of annual decline, taking the value of exports to China below that to the United States.

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The fall in exports is a telling sign of the damage from a territorial row between the two Asian nations this year and China's weaker economy, which has muted demand for Japanese goods.

Exports to Europe dropped 19.9 percent in November from the previous year, as the continent's sovereign debt crisis, high unemployment and recession took their toll.

Shipments bound for the United States rose an annual 5.3 percent in November, faster than a 3.1 percent increase in the year to October, due to higher exports of cars and car parts.

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However, economists say this pick-up is only temporary as long as the U.S. "fiscal cliff" threat of automatic tax hikes and spending cuts weighs on U.S. corporate activity.

"What is worrying is that even when overseas economies start to improve, Japan's exports don't improve as much as they used to," said Yasuo Yamamoto, senior economist at Mizuho Research Institute.

"Carmakers have moved a lot of production offshore. Japan's market share for electronic parts is also falling. Weak exports means a weak economy, and this supports monetary easing."

"Car exports to the United States were so weak for so long that there was a little bounce, but we really need to get past the fiscal cliff," said Hiroaki Muto, senior economist at Sumitomo Mitsui Asset Management Co.

"Japan's exports could recover in the first quarter of next year, but the momentum of the recovery won't be that strong."

Japan's imports rose 0.8 percent from a year earlier. The trade deficit of 953.4 billion yen in November was less than the 1.03 trillion yen deficit projected by economists, but it was the fifth straight month of deficit, and the largest since January's 1.48 trillion yen.

Japan's economy contracted for a second straight quarter in July-September as the weak global demand tipped the export-reliant economy into a mild recession.

Economists forecast that Japan will emerge from recession in January-March, and there are high expectations that Japan's new government will encourage the Bank of Japan to take more aggressive steps to boost growth and end persistent deflation.

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Incoming premier Abe will get a second chance to lead Japan after his Liberal Democratic Party surged back to power in Sunday's election.

Abe has made inflation targeting, aggressive central bank purchases of government debt, and a weak yen the focus of his economic platform to revive Japan and end deflation.

The Bank of Japan finishes its two-day monetary policy meeting on Thursday. Fourteen of 19 economists polled by Reuters last week said they expected it to ease again this week, most likely by increasing its 91-trillion-yen asset buying and lending program by up to 10 trillion yen.