UPDATE 3-Japan export growth slows; yen rise may hurt ahead

(For more stories on the Japanese economy click [ID:nECONJP])

* June exports up 27.7 pct yr/yr vs f’cast 23.5 pct rise

* Annual export growth slows for 4th straight month in June

* Real exports show modest drop from previous month

* Yen rise impact not yet seen but to hurt ahead -analysts

* Sharp yen rise could prompt BOJ action -analysts
(Adds real export index)

By Rie Ishiguro

TOKYO, July 26 (BestGrowthStock) – Japanese exports rose more than
expected in June from a year earlier but the pace of increase
slowed for the fourth straight month, a sign the economic
recovery may lose steam on moderating overseas demand.

While analysts expected export growth to slow from a sharp
rebound in the first quarter, the yen’s recent gains and signs
of a slowdown in big markets such as the United States and China
have heightened uncertainty on the outlook for Japan’s
export-reliant economy.

“Exports to China may have peaked for now. Shipments to
Europe and the United States can’t be relied on either. That
means the key will be whether exports to other Asian nations
sustain momentum,” said Takeshi Minami, chief economist at
Norinchukin Research Institute.

“The impact of recent yen rises will appear with a time lag,
so we’ll see it affecting exports in the coming months. I think
the impact will be pretty significant.”
Graphic of yen moves http://r.reuters.com/hyq68m
More stories on the Japanese economy [ID:nECONJP]

Exports rose 27.7 percent in June from a year earlier, more
than a median market forecast for a 23.5 percent increase, trade
data from the Ministry of Finance showed on Monday. [JPEXPY=ECI]

But export growth slowed for the fourth straight month after
peaking in February, when it rose 45.3 percent, boding ill for
an economy heavily reliant on overseas demand. From May, exports
were down 1.8 percent, the second consecutive drop on a
month-on-month basis.

Shipments to Asia, which account for more than half of
Japan’s total exports, rose 31.7 percent in June from a year
earlier but that still represented a slowing for the fifth
straight month.

Exports to China rose 22.0 percent from a year earlier, also
marking the fifth straight month of slowdown.

The slowdown was particularly noticeable in shipments to the
European Union, with growth shrinking to 9.0 percent from 17.4
percent in May, as the yen’s rise against the euro and the
region’s debt crisis hurt automobile demand, a MOF official

But exports to the United States picked up on brisk auto
shipments, as the yen’s rise against the dollar had been
relatively gradual.

“A strong yen has already started to push down export
prices, but exporters have managed to offset it with surges in
volume,” said Junko Nishioka, chief economist at RBS Securities
in Japan.

The real exports index compiled by the Bank of Japan, used
to assess changes in export volume, edged down 0.4 percent to
mark its first drop in 16 months, but the degree of fall was
modest compared to strong rises in preceding months, indicating
export volumes have held relatively steady.

“But the impact of the strong yen will likely become more
visible from July-September as exports to Asia will likely show
no further growth and will not help expand export volumes, while
the U.S. economy’s dim outlook keeps the yen on an uptrend,”
Nishioka said.

Japan’s economy expanded 5 percent in the first quarter of
this year after emerging from recession last year, driven by
solid exports to fast-growing emerging Asian nations.

Some analysts warn that the yen’s appreciation may hurt
exports by reducing the competitiveness of Japanese goods sold
overseas, prompting the Bank of Japan to loosen monetary policy

While yen moves alone are unlikely to trigger an immediate
policy response by the BOJ, sharp yen gains accompanied by stock
market falls deep enough to threaten the economy’s recovery
could lead to further monetary easing. [ID:nTOE667043]

“One of the worries for Japan’s economy at the moment is the
yen’s appreciation. If the yen firms rapidly it could raise
concerns about Japanese companies’ profits, thus stocks would be
expected to fall,” said Tatsushi Shikano, a senior economist at
Mitsubishi UFJ Morgan Stanley Securities.

“If the yen firms and stocks fall sharply, the Bank of Japan
may have to take some measures.”

Stock Market Basics
(Editing by Michael Watson)

UPDATE 3-Japan export growth slows; yen rise may hurt ahead