Monday, 22 December 2008

Japanese exports collapse

Here's why the Yen is unsustainable under 100.00:

TOKYO, Dec 22 (Reuters) - Japan's exports plunged at a record annual pace in November with shipments to Asia dropping the most since 1986 as a global economic slump and a surging yen slashed demand for everything from autos to electronics.

While imports fell 14.4 percent as the Japanese economy languished in recession, the 26.7 percent plunge in exports was large enough to keep the trade balance in deficit for a second month running. Japan last logged trade deficits two months in a row during a previous spell of yen strength in 1980.

The Japanese currency has surged around 20 percent against the dollar this year as investors spooked by the global financial crisis bailed out of risky assets and brought funds home. Shipments to the United States sank a record 33.8 percent on slack demand for automobiles. The United States is in recession and American demand for Japanese goods has been falling for 15 months, ever since U.S. mortgage defaults started to squeeze global credit markets.

By contrast Asian markets held up for much of the crisis, but are now crumbling at dizzying speed. Exports to Asia fell 26.7 percent in November. Shipments to China dropped 24.5 percent, the biggest fall since 1995, on weak demand for semiconductors, digital cameras and other electronic goods, the Ministry of Finance said. "The drop shows that domestic demand in China for Japanese goods is not that strong," said Kaori Yamato, an economist at Mizuho Research Institute.

The Chinese economy is slowing sharply as exports to Europe and the United States plunge. Collapsing export markets have slashed Japan's once politically sensitive trade surplus. The trade deficit of 223.4 billion yen ($2.50 billion) in November was smaller than a median market forecast of 257.5 billion yen. "Exports will probably be weak at least until the end of this fiscal year," said Maiko Noguchi, senior economist at Daiwa Securities SMBC. "After that there will be some help from fiscal spending (by other countries) but it's still not clear the economy could recover sustainably."

The Japanese government grew more pessimistic about the economy for the third straight month, citing rapidly falling output and corporate profits in its economic report for December. "Economic conditions are worsening," the government said in the report. It was the first time the government used that expression since February 2002. The deepening economic gloom at home and abroad is forcing Japanese companies such as carmakers Toyota and Honda to slash output and profit forecasts.

A Ministry of Finance survey showed earlier this month that Japanese corporate profits in July-September fell at the sharpest pace in 6-½ years. A Reuters poll showed on Monday the mood among Japanese manufacturers at an all-time low and deteriorating at the fastest pace on record in December.

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