Japan's exports rose by the most in seven years in November on signs of a pickup in demand from China, calming worries that the economy will slip back into recession next year.
Shipments to China rose from a year earlier for the first time since global trade collapsed late last year and economists said demand from China and the rest of Asia will continue to support exports and offset weak domestic demand.
That is welcome news for a government scrambling to avert the risk of another slump in the economy even as many other countries are preparing for recovery and the unwinding of emergency measures put in place during the height of the crisis.
"I'd say the recovery in exports so far this year has been close to the best scenario we had thought of at the beginning of the year," said Junko Nishioka, chief economist at RBS Securities in Tokyo.
"Given that exports are growing solidly despite the yen's rise last month, we don't need to be overly pessimistic about growth. The economy will perhaps slow down early next year but a recession is unlikely."
Exports rose a seasonally adjusted 4.9 per cent in November from the previous month, increasing for the fourth straight month and setting the strongest pace since November 2002.
The real exports index, compiled by the Bank of Japan, edged up 0.6 per cent, rising for the eighth straight month.
November exports fell 6.2 per cent from a year earlier, slightly less than expected and the smallest fall since the global crisis blew up late last year. October exports had fallen 23.2 per cent from a year earlier.
Exports to China in November rose 7.8 per cent from a year earlier, up for the first time in 14 months, with sales of such products as chemical compounds, auto parts and resins contributing to growth.
Exports to China have jumped in a number of countries, though analysts partly attribute this to the comparison with a weak set of figures for November 2008, when world trade was slumping. Thai customs data released today showed November exports to China jumped 77 per cent, and Korea reported earlier this month a 55 per cent rise.
As a result, exports to Asia, which account for more than half of Japan's total exports, rose 4.7 per cent from a year earlier, also the first annual rise since September last year.
"Strong domestic demand in Asia, rather than demand created by government stimulus, is making a bigger contribution to the recovery in Japan's exports than before," said Seiji Shiraishi, chief economist at HSBC Securities Japan.
"Still, we need to be cautious about the outlook for exports because not all Asia-bound exports are consumed locally but some of them are shipped elsewhere. So a slowdown is likely early next year when global stimulus runs its course," he said.
Demand from developed economies was still falling, underlining the different pace of recovery in the world economy.
Exports to the United States fell 7.9 per cent, much smaller than a fall of 27.6 per cent in the previous month. But auto exports rose for the first time since April 2008.
Japan's November trade surplus was 373.9 billion yen ($4.13 billion), bigger than a median forecast of 344.5 billion yen.
The rebound in exports has been a major driving force behind Japan's recovery from its worst recession in decades.
Although few economists expect another recession, they say Japan's economy will likely grow very slowly in the first half of next year.
"We still expect the economy to show a temporary dip in the second quarter of next year because of feeble domestic consumption and slumping corporate capital spending," said Atsushi Matsumoto, economist at Mizuho Research Institute.
Headline growth in Japan exports may also slip as Japanese companies shift production to China to take advantage of strong local consumption, he added.
Earlier this month the government of prime minister Yukio Hatoyama, in office for three months, unveiled an additional stimulus package worth $81 billion aimed at averting a downturn ahead of upper house elections next year.
It has also pressured the Bank of Japan to take action to support the economy further. This month the BOJ held an emergency meeting and offered a new funding operation and just last week it toughened its definition of deflation, setting the scene for new measures.
Reuters