Japan export rebound eases fear of new recession

* Japan exports to Asia fall at slowest annual rate in a year * October exports rise 2.5 percent from previous month * Export recovery likely to continue for remainder of 2009 * Exports could offset Japan GDP slowdown expected next year

By Hideyuki Sano

TOKYO, Nov 25 - Japan's exports grew in October for the third straight month thanks to robust shipments to Asia, suggesting that a strong recovery in the region will support the country's export-driven economy for the rest of this year.

Declines in exports also slowed compared with a year ago, easing concerns among some economists that Japan's economy will fall back into recession next year.

China's economy is still powering ahead, and there are signs of recovery in domestic demand in other important markets such as the United States, that should support demand for Japan's goods, economists say.

Still, Japan's imports are slow to improve, showing that domestic consumption is structurally weak because of an ageing population and that the economy is vulnerable to any shocks.

"Japan's exports have got off to a good start in October after solid growth in the third quarter, led by shipments of cars and electronics as well as robust demand for steel and other materials from China," said Tatsushi Shikano, senior economist at Mitsubishi UFJ Securities in Tokyo.

"Japan's recovery will continue to be backed by exports and is unlikely to suffer a double dip as some market players fear."

Exports rose a seasonally adjusted 2.5 percent in October from the previous month, the third straight month of increase the Finance Ministry data showed.

The ministry's seasonally adjusted figures do not exclude the effect of currency swings.

Compared with a year ago, Japan's exports fell 23.2 percent in October, less than a median market forecast for a 26.5 percent decline and slower than a 30.6 percent annual decline the previous month.

For a graphic on the data, click on:

http://r.reuters.com/dac53g

Exports to Asia, which account for more than a half of Japan's total shipments, fell 15.0 percent in October from a year ago, the slowest pace of decline in one year.

Shipments to the United States fell 27.6 percent in October from September, slower than a 33.9 percent annual decline the previous month.

Export volume to Asia has almost recovered to the level it was at in October 2008, a finance ministry official told reporters at a briefing. Exports to the United States have risen 52.5 percent since bottoming out in February, the official said.

The rebound in exports has been a major driving force behind Japan's recovery. The economy grew 1.2 percent in the three months to September after a revised 0.7 percent expansion in the preceding quarter. [ID:nT213576]

Analysts expect Japan's economic growth to slow in coming quarters as the effect of domestic stimulus spending will taper off, a Reuters poll found. Signs of strength in Japan's exports, particularly to China, could offset weakness in Japan's domestic consumption.

"If the recovery momentum in exports continues in January-March, this may help the Japanese economy avoid a slowdown to zero or minus growth in the period by offsetting the negative effects of public spending cuts and stagnant consumption," said Naoki Iizuka, senior economist at Mizuho Securities in Tokyo.

One risk is the yen's recent rise against the dollar, which makes Japanese goods more expensive overseas. The yen traded at 88.53 yen per dollar <JPY=> on Wednesday, not far from a 13-year high of 87.10 per dollar hit in January, helping to push Nikkei share average <.N225> to a four-month low this week. ((hideyuki.sano@thomsonreuters.com; +81 3 6441 1827; Reuters Messaging: hideyuki.sano.reuters.com@reuters.net)) ((If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com))