Japan exports fall after quake, further fall likely

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By Tetsushi Kajimoto
TOKYO | Tue Apr 19, 2011 9:34pm EDT
(Reuters) - Japan's exports fell in March from a year earlier at a faster pace than economists expected, in a sign that shipments will continue to weaken and hurt economic growth after last month's earthquake and tsunami sparked a nuclear crisis and disrupted supply chains for many manufacturers.

A further decline in exports will likely push Japan's trade balance into a deficit and weigh on gross domestic product, economists say, as companies struggle with a shortage of electricity and parts needed to make goods in the wake of the March 11 natural disaster that struck Japan's northeast coast.

Japan's economy is likely to contract in the second quarter and then resume growing in the third quarter as efforts to rebuild the northeast take hold, but damage to supply chains and factory output could linger, depriving the export-focused country of a vital contribution to gross domestic product and setting the stage for further easing by the central bank.

"As supply chains are expected to recover in late May, the drop in exports may prove short-lived," said Yuichi Kodama, economist at Meiji Yasuda Life Insurance.

"But due to power supply constraints expected in the summer, a full pickup in exports is unlikely until at least the end of this year. The Bank of Japan is likely to be prompted to ease its policy further in coming months."

POWER SUPPLY CONSTRAINTS

Exports fell 2.2 percent in March from a year earlier, more than a median forecast for a 1.5 percent annual fall. That marked the first decline in 16 months. Imports rose 11.9 percent from a year earlier against a forecast for a 6.0 percent annual rise, trade data issued by the Finance Ministry showed.

Exports of cars tumbled 27.8 percent from a year earlier, making the biggest contribution to the decline in overall exports. Semiconductors and electronics fell 6.9 percent from a year ago.

Among Japan's two major export destinations, shipments to China rose an annual 3.8 percent while shipments to the United States fell an annual 3.4 percent.

The trade balance came to a surplus of 196.5 billion yen, much less than the median estimate for a 493.6 billion yen surplus.

Japan is facing its worst crisis since World War Two after a 9.0 magnitude earthquake and a tsunami towering more than 10 meters battered its northeast coast on March 11, leaving nearly 28,000 dead or missing and triggering radiation leaks at a nuclear power plant.

Shortages of electricity and important parts that manufacturers need to make their goods point to the possibility of deep and long-running output disruptions from Japan that could also hobble factories elsewhere in the world.

Japan's economy is expected to contract in the current quarter but will grow again in July-September on reconstruction efforts, a Reuters poll showed. Some economists say gross domestic product may have contracted in January-March, meaning three straight quarters of contraction to June cannot be ruled out.

(Editing by Edmund Klamann)