Japan's export growth slowed for the fifth straight month in July as slowing global demand and a strong yen erode a key driver of the country's economy.
The deceleration poses a major risk for Japan's export-driven recovery. With lackluster demand at home, the country has depended on high-growth countries like China to fuel the economy.
That expansion is now waning just as exporters face a new onslaught from the yen, which hit a fresh 15-year high against the U.S. dollar this week. It weakened slightly on Wednesday amid speculation that Japan's monetary authorities might intervene in the currency market for the first time since March 2004 to stem the rise.
An appreciating yen is toxic for exporters like Toyota Motor Corp. and Sony Corp. because it shrinks the value of repatriated profits and makes their products less competitive overseas.
"When it is needed, we must respond with appropriate measures," Finance Minister Yoshihiko Noda told reporters. He said he hoped to work closely with the central bank.
Growing political pressure could also prompt the Bank of Japan to further ease monetary policy to try to weaken the yen, according to local media reports. Economists say the central bank may decide to boost liquidity by expanding its three-month low-interest loan program for financial institutions.
The policy board's next scheduled meeting begins Sept. 6.
The finance ministry's latest figures showed that the value of exports climbed 23.5 percent from a year earlier to 5.98 trillion yen ($71 billion). Exports had expanded 27.7 percent in June and 32.1 percent in May.
The strong yen is responsible for much of the export slowdown, said Kyohei Morita, chief economist at Barclays Capital Japan, in a note to clients.
Japan's economy grew at an annualized pace of just 0.4 percent in the April-June quarter, losing its place to China as the world's No. 2 economy. Prime Minister Naoto Kan is expected to craft a new stimulus package and has asked ministry heads for ideas.
Exports to China, Japan's trading partner rose 22.7 percent in July, while those to the U.S. were up 25.9 percent. Shipments to the European Union expanded 13.3 percent.
Demand for machinery jumped more than 53 percent, and motor vehicle exports rose 27.1 percent.
Imports in July rose 15.7 percent to 5.18 trillion yen ($61.5 billion), resulting in a trade surplus of 804.2 billion yen ($9.5 billion).
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