Japan's September export declines at a slow pace over shipment recovery

By Daniel Leussink

TOKYO (Reuters) - Japan's exports in September fell at a slower pace than in the previous six months as U.S.-bound shipments of cars started to recover from COVID-19 lows, suggesting the pandemic's pressure on the economy was easing.

The slower decline in exports added to signs that the world's third-largest economy has started to gradually rebound from the shock of the health crisis after bottoming out.

Total exports lost 4.9% year-on-year in September, a larger decline than the 2.4% drop expected by economists in a Reuters poll. That still meant the pace of contraction in exports eased following six months of double-digit declines, including a 14.8% drop in the previous month.

Exports fell for their 22nd straight month, marking the longest run of declines since a 23-month run through to July 1987, driven by fewer exports of iron to Taiwan and ships to Panama.

"We think (exports) should return to pre-virus levels before the end of the year," said Marcel Thieliant, Japan economist at Capital Economics.

"However ... we only expect imports of goods and services to return to pre-virus levels by end-2022."

A Reuters poll on Friday showed analysts think the government of Prime Minister Yoshihide Suga should compile a third extra budget for the current fiscal year to further support the economy.

Japan has already announced $2.2 trillion across two stimulus packages to protect the economy from the hit of the COVID-19 crisis, including cash payments to households and small business loans.

Local media have reported Suga wants to order his government to compile extra stimulus measures as early as November, a move that could help shore up fragile consumer sentiment that especially faces risks from a new wave of infections.

Gross domestic product was expected to expand an annualised 15.1% in the third quarter after posting a record contraction in the preceding three months, the poll showed.

By destination, shipments to the United States - Japan's key market - rose 0.7% in the year to September, a much slower pace than the 21.3% drop seen in August, driven by stronger demand for passenger cars and electrical power machinery.

Exports to China, Japan's largest trading partner, rose 14.0% year-on-year in September, marking the third straight monthly rise in China-bound shipments, the data showed.

Exports to the rest of Asia lost 2.0%, their slowest pace of decline since February.

Overall imports shed 17.2% in the year to September, versus the median estimate for a 21.4% decline.

As a result, the trade balance came to a surplus of 675.0 billion yen ($6.4 billion), versus the median estimate for a 989.8 billion yen surplus.

(Reporting by Daniel Leussink; Editing by Sam Holmes and Christopher Cushing)

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