Japan's annual export growth slowed
for an eighth straight month in October due to a stronger yen,
and a central banker said downside risks to the Japanese economy
outweigh upside risks due to uncertainties abroad.
Slowing exports bode ill for an economy bracing for a
possible contraction in the final quarter of this year as a
temporary boost from stimulus-driven consumption tapers off.
Overseas demand for Japanese goods is likely to pick up again
next year and help Japan avoid recession, economists say, but
China's monetary policy tightening, European sovereign debt woes
and developments in the U.S. economy pose risks to the outlook.
Bank of Japan (BOJ) board member Seiji Nakamura said exports
could recover next year, but he warned of growing risks facing
the U.S. and European economies and said he remained on alert for
a possible spike in the yen stemming from problems in major
Nakamura sounded less upbeat than Governor Masaaki Shirakawa,
who has described risks to Japan's economy as evenly balanced,
suggesting Nakamura would not dissent if the BOJ were to boost
its 5 trillion yen ($59.87 billion) asset-buying scheme in
response to a worsening in the economy.
"Overall, downside risks (to the Japanese economy) seem
somewhat stronger than upside risks," Nakamura told a news
conference, citing strong uncertainties about the outlook for the
"There are worries ... sovereign debt problems in peripheral
Europe could affect the European economy by triggering spikes in
bond yields and worsening sentiment," he said in a speech.
"We tend to think that the economy could rebound as early as
January-March, because leading indicators for Japanese exports,
such as U.S. new orders, are stabilising," said Satoru Ogasawara,
an economist at Credit Suisse in Tokyo.
"If Nakamura sees further downside risks, it could mean he's
worried new orders overseas will start falling, and that would be
a risk to our economic forecasts."
One of the BOJ's two deputy governors, Hirohide Yamaguchi,
also said this month that the central bank needs to be mindful of
downside risks to Japan's economy.
Exports rose 7.8 percent in October from a year earlier, the
finance ministry said on Thursday, less than the median forecast
for a 10.7 percent rise. [JPEXPY=ECI]
Financial markets shrugged off the data. The Nikkei average
.N225 edged toward a five-month high on demand from overseas
Shipments to the United States in October rose 4.7 percent
from a year earlier, slower than the previous month's 10.4
percent, while exports to Europe fell an annual 1.9 percent, the
first decline in almost a year as worries about Ireland's debt
burden pushed bond yields higher. [ID:nLDE6AM25A]
In one positive sign, exports to China, the biggest
destination for Japanese goods, rose 17.5 percent from a year
earlier, faster than the 10.2 percent annual rise in September
due to higher shipments of metal-processing machines.
Data on jobless benefit claims and consumer spending suggests
the U.S. economic recovery is gaining strength, but a high
unemployment rate, weakness in the housing market and a reduction
in household debt cloud the outlook. [ID:nN24211131]
The BOJ eased monetary policy last month by pledging to keep
rates in a range from zero to 0.1 percent until the end of
deflation is in sight and announcing a plan to buy assets ranging
from government bonds to corporate debt.
The size of the 5 trillion yen asset buying pool now
effectively serves as a gauge of the BOJ's monetary easing.
Nakamura was cautious about setting the policy rate at zero,
saying it could reduce commercial banks' incentive to lend and
harm the money market.
Shirakawa has said topping up the asset buying plan is a
clear option if the looming economic slowdown proves worse than
expected. But the yen's retreat from 15-year highs scaled early
this month makes any radical near-term action unlikely.
Japan's economy grew a solid 0.9 percent in the third quarter
as expiring government incentives gave consumption a last-minute
boost before a long-anticipated slowdown.