Japan Exports Plunge Record 27% as Recession Deepens

Japan’s exports plunged the most on record in November as global demand for cars and electronics collapsed, signaling more factory shutdowns and job cuts are likely as the recession deepens.

Exports fell 26.7 percent from a year earlier, the Finance Ministry said today in Tokyo. That was more than the 22.3 percent decline estimated by economists and the sharpest since comparable data were made available in 1980.

Shipments to the U.S. slid an unprecedented 34 percent and sales to China slumped the most in 13 years, underscoring why the Bank of Japan lowered its key interest rate to 0.1 percent last week. The yen’s surge to a 13-year high is amplifying the woes of exporters including Toyota Motor Corp., which may announce a lower earnings forecast at a press briefing today.

“Japan’s export crash is finally upon us, and this is the worst thing that could happen,” said Yoshiki Shinke, a senior economist at Dai-Ichi Life Research Institute in Tokyo. “The recession will be very severe as companies adjust investment, production and labor.”

The yen weakened and stocks rose on speculation emergency loans to General Motors Corp. and Chrysler LLC will stem a deeper U.S. downturn.

Japan’s currency fell to 90.02 per dollar as of 1:16 p.m. in Tokyo from 89.50 before the trade report was published and 87.14 on Dec. 17, the strongest since 1995. The Nikkei 225 Stock Average climbed 1 percent.

Getting Worse

The government today lowered its assessment of the world’s second-largest economy, saying it’s “worsening” for the first time since 2002. Gross domestic product shrank in the past two quarters, sending Japan into its first recession since 2001.

Toyota, Honda Motor Co. and Sony Corp. are among the companies that are shedding thousands of workers and closing production lines as profits dwindle. Car exports slid 32 percent last month, the most ever, and semiconductors slumped 29 percent, the ministry said.

Today’s report showed the global recession is spreading to the emerging markets that propped up exports as demand from the U.S. and Europe evaporated. Exports to Asia fell 27 percent, the most in 22 years. Shipments to China, Japan’s largest trading partner, tumbled 25 percent, the steepest decline since 1995.

“There are no markets that can make up for the drop in demand for Japanese-made goods,” Dai-Ichi Life’s Shinke said.

Exports to Europe slid 31 percent, the second-most ever.

Another Deficit

Imports fell 14.4 percent, the first decline in 14 months, as oil costs eased and the yen gained. That wasn’t enough to prevent a trade deficit of 223.4 billion yen ($2.5 billion), the third shortfall in four months.

The yen strengthened 25 percent against the dollar this year as the global financial crisis prompted investors to sell riskier assets purchased with money borrowed in the currency.

Honda President Takeo Fukui said last week that the carmaker may shift more manufacturing overseas if the yen strengthens further and urged government action to halt its ascent. Every 1 yen gain against the dollar cuts Honda’s annual operating profit by 18 billion yen, according to the company.

Finance Minister Shoichi Nakagawa said last week that he has “the means” to sell yen to stem its appreciation. Japan hasn’t intervened in the foreign-exchange market since 2004.

Companies are also struggling to obtain funding as the market turmoil dissuades investors from buying corporate debt. To help businesses get financing, the Bank of Japan last week decided to buy commercial paper for the first time.

Gloomy Households

Sales at home are unlikely to make up for the collapse in demand from abroad. Households, whose confidence is at a record low, pared spending in each of the eight months to October as wage growth stagnated and job prospects worsened.

The Finance Ministry last week submitted an extra budget for the year ending March that includes 2 trillion yen in cash handouts for households as Prime Minister Taro Aso tries to spur spending. That may be too little, too late, economists say.

“Japan’s economy has never weaned itself off of the overbearing reliance on exports, and especially to the U.S.,” said Kirby Daley, senior strategist and head of capital introductions at Newedge Group. “Japan did nothing to prepare itself” for the collapse in demand from abroad.