Japan exports fall fastest in three years

Tokyo - Japan's gross domestic product is likely to avoid a contraction for the time being as domestic demand has performed better than expected, but declining exports highlight the risks that China's slowdown and turmoil in emerging markets pose to the outlook.

Japan's exports in November fell at the fastest pace in almost three years as shipments to Asia declined in a worrying sign that weakness in overseas demand could curb economic growth.
Japan's gross domestic product is likely to avoid a contraction for the time being as domestic demand has performed better than expected, but declining exports highlight the risks that China's slowdown and turmoil in emerging markets pose to the outlook.
Ministry of Finance data showed on Thursday that exports fell 3.3 per cent in November from a year earlier, more than the median estimate for a 1.5 per cent annual decline in a Reuters poll.
That was the biggest decline since a 5.8 per cent year-on-year fall in December 2012.
The Bank of Japan is expected to keep monetary policy steady on Friday following the US Federal Reserve's first interest rate increase in a decade.
Exports to China fell 8.1 per cent in November from a year ago, the biggest decline since February, due to lower shipments of plastics and electronic parts. Shipments to Asia - which account for about a half of Japan's overall exports - fell 8.7 per cent in November, the biggest decline since July 2012. Exports to the United States, a major buyer of Japanese products, rose two per cent in November, due to gains in cars and pesticides, but that was slower than a 6.3 per cent year-on-year increase in October.
Imports fell 10.2 per cent in November versus a year ago, swinging the trade balance to a deficit of ¥379.7 billion ($3.10 billion). The median estimate was for an 8.3 per cent annual decline in imports and a ¥446.2 billion trade deficit.
Some economists speculate the BoJ could ease policy as early as next month as declining oil prices force the central bank to cut its consumer price growth forecasts.
Weak exports are another worry, because they suggest corporate profits could slow, which could in turn weigh on workers' wages and capital expenditure. There are also concerns that the Fed's rate hike will draw money out of emerging markets, which could further undermine overseas demand.
$27b extra stimulus
Meanwhile, Japan's cabinet is set to approve on Friday an extra budget worth $27 billion to fund stimulus spending for the current fiscal year ending in March to rev up the flagging economy, government sources told Reuters.
The ¥3.3213 trillion ($27.14 billion) extra stimulus budget includes spending for steps to support elderly pensioners with cash benefits and farmers seen hit by the Trans-Pacific Partnership (TPP) trade deal, the sources said on condition of anonymity because the plan has not been finalised.
In a show of efforts to fix dire public finances, the government will fund the stimulus without resorting to fresh borrowing, while tapping cash reserves left from the previous year's budget and higher-than-expected tax revenue, they said.
These funding sources will allow the government to reduce its plans to issue new bonds by ¥444.7 billion from the initially planned ¥36.9 trillion, they said.
The government revised up the tax revenue estimate for this fiscal year by ¥1.899 trillion to a 24-year high of ¥56.4 trillion, reflecting increase in corporate tax payments on the back of rising profits.
Non-tax revenue was cut by ¥346.6 billion from an initial estimate of ¥4.95 trillion, due to expected cuts in the Bank of Japan's payment into the government's coffers because of the bank's plan to replenish its reserves.
The extra budget will be sent to parliament for approval early next year, along with an annual budget for the coming fiscal year that starts in April.