Slumping Japan exports, factory orders add to headaches for PM Abe, BOJ

Mon May 23, 2016 3:16am EDT
 
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By Tetsushi Kajimoto and Leika Kihara

TOKYO (Reuters) - Japan's exports fell sharply in April and manufacturing activity suffered the fastest contraction since Prime Minister Shinzo Abe swept to power in late 2012, providing further evidence that the premier's Abenomics stimulus policy is struggling for traction.

The bleak readings on the health of the world's third-largest economy follow Japan's failure last week to win support from its global counterparts to weaken the strong yen, which Tokyo fears could do further damage to the sputtering economy.

They also add pressure on both Abe and the Bank of Japan to do more to rev up flagging growth, even as economists and global investors worry that central banks may be reaching their limits with radical experiments that have yet to kick-start growth.

Data on Monday showed Japan's exports fell 10.1 percent in April from a year earlier, the fastest decline in three months as a stronger yen and weakness in China and other emerging markets take their toll on the country's shipments.

Imports shrank more than 23 percent, reflecting not only lower commodity prices but stubbornly weak domestic demand that has defied a massive asset-buying program by the BOJ which is now into its fourth year.

The decline was likely exaggerated by a drop in U.S.-bound car exports due to supply-chain disruptions caused by earthquakes in Japan last month, but a firmer yen and lackluster global demand are clouding the outlook for 2016. Some analysts fear the economy could contract this quarter after dodging a return to recession early in the year.

"Drops in U.S.-bound car exports were noise," said Takeshi Minami, chief economist at Norinchukin Research Institute.

"Asia and the global economy remain weak. On top of that, yen gains squeeze profits at exporters, causing wages and capital spending to weaken, which would hamper 'Abenomics' aim of creating virtuous growth," Minami said.   Continued...

 
A laborer works in a container area at a port in Tokyo, Japan, March 16, 2016.    REUTERS/Toru Hanai/File Photo