Exports plummeted 35 percent from a year earlier, the sharpest decline since 1980, the earliest year for which there is comparable data, the Finance Ministry said today in Tokyo. The December drop eclipsed a record 26.7 percent decline set the previous month. Economists predicted a 30.3 percent contraction.
Shipments to the U.S., China and Europe plunged the most ever, as the global recession dried up demand for Japanese cars and electronics. Toyota Motor Corp., Sony Corp. and Honda Motor Co. are shedding thousands of workers and closing production lines as profits and sales dwindle.
Imports fell 21.5 percent from a year earlier, not enough to prevent a trade deficit of 320.7 billion yen ($3.6 billion), the third in a row.
The global recession is spreading to the emerging markets that propped up sales for Japanese manufacturers as demand from the U.S. and Europe faltered. Exports to Asia, which make up about half of Japan’s total shipments, fell 36.4 percent last month.
Shipments to China slid 35.5 percent. Asia’s second-largest economy probably expanded 6.8 percent last quarter, the slowest pace in seven years, economists estimate a government report will show today. Exports to the U.S. dropped 36.9 percent and to Europe tumbled 41.8 percent.
The world’s second-largest economy may have shrunk as much as 12 percent on an annualized basis last quarter, Barclays Capital predicts, which would be the sharpest contraction since 1974. Factory output dropped 8.5 percent in November, the most in more than a half century, and machinery orders, an indicator of future capital spending, fell by the most ever.
Toyota, which is forecasting its first operating loss in seven decades, may cut all 4,500 temporary workers because of sluggish demand, the Yomiuri newspaper said this week, without citing where it obtained the information.
Honda, Japan’s second-largest carmaker, said last week it plans to fire all of its 3,100 temporary workers by the end of April. President Takeo Fukui said last month the automaker may be forced to shift more of its production overseas if the yen strengthens further.
Every 1 yen gain against the dollar cuts the automaker’s operating profit by 18 billion yen, according to the company. A stronger currency eats into the value of repatriated earnings and makes exported products more expensive overseas.
Mounting evidence the economy is in crisis prompted the Bank of Japan last month to cut interest rates to 0.1 percent. Governor Masaaki Shirakawa and his colleagues at the end of a meeting today will likely announce the details of a plan to buy commercial paper, short-term debt companies use to fund daily operations.
The government has been unable to pass a stimulus package that could help encourage domestic spending in the absence of export demand. Prime Minister Taro Aso, who has called the recession a once in a 100 year” crisis, is struggling to get approval from the opposition-led upper house to spend 10 trillion yen ($111 billion) to aid companies and households, whose sentiment fell to a record low this month.