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Japan Export Slide Bolsters Abe’s Case for Driving Down Yen

By Andy Sharp - Jan 23, 2013 7:48 PM CT

Japan’s exports fell more than analysts forecast and the annual trade deficit swelled to a record, bolstering the case for Prime Minister Shinzo Abe to weaken the yen even as trade tensions mount.

Shipments dropped 5.8 percent in December from a year earlier, compared with a median estimate for a 4.2 percent decline in a Bloomberg News survey of 23 economists. The annual deficit was 6.93 trillion yen ($78 billion), the finance ministry said in Tokyo today.

Japan is mounting a defense of its currency policies ahead of a Group of 20 meeting next month, as officials from Germany to South Korea express concern at efforts to weaken the yen. In an interview in Tokyo yesterday, currency chief Takehiko Nakao said that the Bank of Japan (8301) is not undertaking a “competitive” devaluation and its aim is to end deflation.

“Foreign officials are becoming increasingly vocal over the possibility that Japan’s policy actions have the potential to prompt a currency war,” said Izumi Devalier, a Japan economist at HSBC Holdings Plc in Hong Kong. “I think the government will avoid taking the rhetoric too far.”

A yen that has weakened about 7 percent against the dollar in the past two months makes products relatively cheaper in export markets and boosts overseas income for Japanese companies such as Canon Inc. (7751) when repatriated. It also pushes up the cost of imports such as liquefied natural gas.

Yen’s Level

The currency pared gains after the trade figures were released, and was 0.1 percent higher at 88.52 per dollar at 10:32 a.m. in Tokyo. The Nikkei 225 Stock Average was 0.1 percent lower.

With imports rising 1.9 percent and exports falling for seven months, the nation’s trade shortfall in December was 641.5 billion yen, the sixth month in deficit. Imports of LNG rose 8.3 percent from a year earlier.

Japan’s export slide comes as Europe’s crisis drags on shipments and a diplomatic dispute with China over islands claimed by both nations hurts demand for products such as Toyota Motor Corp.’s cars.

Exports to China fell 15.8 percent from a year earlier, while those to the U.S. dropped 0.8 percent. Shipments to the European Union were 11.1 percent lower.

“These are bad numbers for the economy,” said Junko Nishioka, chief economist at RBS Securities Japan Ltd. and a former BOJ official. “The positive impact of the yen’s decline on exports has yet to be seen, but it is already boosting import values.”

Asset Purchases

The yen strengthened on Jan. 22 by the most since May after the Bank of Japan said it will adopt a 2 percent inflation target with no deadline and delay Federal Reserve-style open- ended asset purchases until January 2014.

Goldman Sachs Group Inc. and Societe Generale SA are predicting that Japan’s currency will resume declines as Abe presses for more easing. Goldman yesterday raised its growth forecast for the year beginning April 2013 to 2 percent from 1.2 percent and said it sees the yen at 100 per dollar by the end of 2015.

“Abe will try to push the yen down as far as he can, at least to 100-105 per dollar,” said Lee Sang Jae, a senior economist at Hyundai Securities Co. in Seoul. “Today’s export figures will reinforce his case.”

South Korean Finance Minister Bahk Jae Wan said in Seoul yesterday that his nation’s exporters may be “at risk” from Japanese policies.

The Japanese government yesterday raised its view of the economy for the first time in eight months after it unveiled a 10.3 trillion yen fiscal stimulus package this month
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Author: Nobuyoshi Ozaki

A long forty six years have passed since I stepped on to American soil. I have had various odd jobs in the past until I recently retired. Examples include working with Steven Spielberg as assistant director in a film called "1941." I was supervisor and later became Public Relation representative for Toyota Group - USA. My last occupation was a Senior Research analyst working in Silicone Valley for a major news paper from Tokyo, Japan. My spouse, Christine is a flight attendant, traveling often to the Middle East and Africa. We have spent three quarters of our life together as world adventurers. This photo was taken in Argentina. We now live in swampy Louisiana.