* Exports fall 8.1 pct in July yr/yr, worse than forecast
* Marks sharpest drop in exports since January
* Raises fresh concerns about global demand, recovery
* Underlines expectations euro bloc slipping into recession
* Korea, Taiwan indicators suggest exports pressure
By Leika Kihara and Stanley White
TOKYO, Aug 22 Japan's exports slumped the most
in six months in July as shipments to Europe and China tumbled,
adding to concerns over global demand after a string of dire
trade figures from Asia's export engines.
The 8.1 percent annual fall was far deeper than economists'
median forecast of a 2.9 percent drop. A 25.1 percent plunge in
exports to the struggling European Union, the biggest such drop
since Oct 2009, saw Japan post a record trade deficit with the
"Europe's debt crisis is the first factor to pull down
exports, and the pace of decline is striking. This is comparable
to the post-Lehman situation," said Masayuki Kichikawa, chief
Japan economist at Bank Of America Merrill Lynch in Tokyo.
"We hoped domestic demand in China would support Japan's
economy, but the story is different."
Wednesday's figures add to the case that the bottom of the
slowdown in economic growth for Asia's major exporters could
well be pushed further back into the third quarter of 2012 from
the second quarter.
"That's the way risks are tilting," said Robert
Prior-Wandesforde, director of Asian economics at Credit Suisse
in Singapore. "It's hard to be optimistic given what's happening
in key trading partners."
Exports from Taiwan, a key part of the global technology
supply chain, fell for a fifth straight month in July. South
Korea, home to major carmakers, computer chip and flat-screen
producers, recorded its sharpest fall in exports in July in
nearly three years.
China's exports rose just 1 percent in July, undershooting
expectations by a big margin.
"We are becoming increasingly concerned," Prior-Wandesforde
said. "Across the board, exports are weaker and have generally
The slump in EU imports of Japanese goods underpinned
expectations that the trading bloc has slipped into a recession.
Exports to China, Japan's largest trading partner, fell 11.9
percent from a year earlier, the biggest decline in five months,
led by lower shipments of semiconductors, electronics and car
That gels with China data that has shown economic growth
struggling to pick up after six straight quarters of decline
despite two rate cuts and reductions in banks' required
In another discouraging sign, Japan's exports growth to the
United States slowed in July for the third consecutive month,
rising 4.7 percent from a year earlier.
Reflecting the sharp decline in overall exports, the
Ministry of Finance figures showed Japan swung to a
larger-than-expected deficit of 517.4 billion yen ($6.5
Analysts said the data heightened the risk that overseas
demand for Japanese goods may not recover in time to take up the
slack from domestic spending as the reconstruction impact after
last year's earthquake begins to fade.
That could stall what is an otherwise fragile recovery in
the world's third-biggest economy.
The strength of the yen also hurts Japanese
exporters. Carmaker Nissan Motor Corp said the yen's
rise had reduced its April-June operating profit of 120.7
billion yen by 25.7 billion yen.
Stock traders said the Japanese data weighed on sentiment in
Asian markets on Wednesday as it provided a reminder of the
risks the euro area posed to Asia's economies.
MSCI's index of Asia Pacific shares outside of Japan fell
0.7 percent. In Japan, exporters Canon Inc and Sony
Corp underperformed the Tokyo market, falling 1 percent
each. The Nikkei average edged 0.3 percent lower.
Data from South Korea and Taiwan suggested little relief for
In the first 20 days of August, South Korea's exports fell
12.4 percent from a year earlier, leaving a $4.5 billion trade
deficit for the period.
Orders for Taiwan's exports, a forward indicator of demand,
slumped 4.4 percent in July over the previous year, far more
Despite the disappointing numbers all round, barring a
larger shock in Europe than currently factored in, Asian
policymakers are unlikely to take any aggressive policy steps to
counter the exports slowdown, said Nigel Chalk, managing
director of research for emerging Asia at Barclays.
"If it's a muddling through a relatively low-growth
scenario, then I don't think you'll see anything big," he said.
"They'll just try to hunker down and push up domestic demand as
much as they can. The underlying growth story isn't terrible.
Things are slowing but it's certainly not recession in most of
Despite the slump in exports, the outlook for Japan's
economy is not as bad as it is for other industrialised
countries, economists say.
The euro zone barely skirted recession in the first half of
2012 and is expected to slip into it in the second half.
Analysts have lowered their expectations for the U.S.
economy in Reuters latest poll.
They have also cut their expectations for Japan's growth in
the second half of calendar 2012, but they still forecast it
will outpace most other G7 countries.
The Bank of Japan has become less convinced about its
recovery scenario, but it hopes to stand pat on monetary policy
for as long as possible to save its limited further options,
after having expanded monetary stimulus in February and April.