Japan’s exports fell for a fifth month, hampered by trade tensions with China and weak demand in Europe, pushing the world’s third-largest economy closer to recession ahead of December elections.

Shipments fell 6.5 percent in October from a year earlier, leaving a trade deficit of 549 billion yen ($6.7 billion), the Finance Ministry said in Tokyo Wednesday. That compared with the median forecast of 25 economists for a 4.9 percent decline in exports. Imports were down 1.6 percent.

Japan will probably slide into recession this quarter on weakness in domestic consumption and falling exports, which account for about 15 percent of the economy. While the yen touched a seven-month low this week on speculation that opposition leader Shinzo Abe will be elected and force more central bank easing, the currency is still more than 30 percent higher than five years ago, hurting exporters’ profits.

“There’s no doubt that Japan’s economy is already in a recession,” said Kiichi Murashima, chief economist at Citigroup Inc. in Tokyo. “Exports will probably continue to decline this quarter.”

The yen dropped to 81.82 per dollar as of 9:25 a.m. in Tokyo from 81.67 right before the data was released. The Nikkei 225 Stock Average was 1 percent higher, on course for its fifth advance in six trading days.

Shipments to China, Japan’s largest export market, fell 11.6 percent as a territorial spat over islands in the East China Sea takes its toll on the $340 billion trade relationship between Asia’s two biggest economies. Exports to the U.S. were up 3.1 percent.

Bank of Japan Governor Masaaki Shirakawa Tuesday pushed back against pressure on the central bank, criticizing the unlimited easing advocated by Abe and urging respect for the BOJ’s independence. The central bank held off from monetary easing after expanding asset purchases in September and October, switching the focus to a December meeting where more measures are forecast. 

Japan’s economy shrank an annualized 3.5 percent in the July-through-September quarter and may contract a further 0.4 percent in the final three months of this year for the third technical recession since 2008, a Bloomberg News survey of economists shows. Japanese recessions are officially defined by a government-charged panel that considers data beyond figures for gross domestic product.


Automakers’ Pain

Motor vehicle exports to China fell 82 percent on year, the largest monthly drop since October 2001, the finance ministry said. Toyota Motor Corp., Asia’s largest automaker, said October deliveries in China declined 44 percent from a year earlier, following a 49 percent drop in September. Nissan Motor Co. cut its full-year profit forecast by 20 percent after weaker sales in China, the company’s largest market.

The government last week reduced its economic assessment for a fourth straight month, the longest streak since the 2009 global recession. Data earlier this month showed machinery orders and domestic factory capacity use falling for a second month in September. Retail sales in September rose less than expected as the expiry of government subsidies for car purchases sapped consumer demand. 

(Bloomberg)