TOKYO, Nov 20, 2008 (AFP) - Japanese exports fell at the fastest pace in almost seven years in October as Asian demand cooled, pushing the world's second biggest economy deeper into recession, official data showed Thursday.
In an ominous sign that the US-born financial crisis is sweeping deeper into Asia, Japan's exports within the region dropped for the first time in 80 months as once-buoyant shipments to China started to fall.
Total exports fell 7.7 percent from a year earlier, the steepest decline since 2001 after the dotcom bubble burst, the finance ministry said.
The drop suggests Japan's recession-hit economy may have an even worse fourth quarter than previously expected, said UBS economist Akira Maekawa.
"It's very likely that the Chinese economy will slow down further next year, which will inevitably affect Japan's economy," he said.
The slump in global demand for Japanese products pushed the trade balance into an unexpected deficit of 63.9 billion yen (665 million dollars), much worse than a year-earlier surplus of 999.4 billion yen.
Falling exports to Asia will "force domestic manufacturers to cut production going forward," warned Morgan Stanley economist Takehiro Sato.
The deficit missed average forecasts for a surplus of 104.8 billion yen. Tokyo stocks plunged 6.9 percent as fears mounted of a deep recession.
Exports to China -- Japan's biggest trading partner -- dropped 0.9 percent, while shipments to the rest of Asia fell 4.0 percent.
"In addition to the higher yen, the economic slowdown in China is becoming a factor pushing down Japanese exports," said a finance ministry official.
Analysts said Japan's exports would likely keep falling.
"Exports are likely to come under further downward pressure during the coming six months or so," said Barclays Capital economist Kyohei Morita.
"The real economy in the US and EU looks likely to deteriorate further... while the Asian economy decelerates. Japanese exports may not see the worst until January-March," he said.
In October shipments of automobiles plunged 15.0 percent by value while those of electronic devices sank 12.6 percent.
Imports rose 7.4 percent, up for a 13th consecutive month, due to high energy costs.
The surplus with the United States dropped 27.5 percent while that with the European Union shrank 24.8 percent.
Japan confirmed this week that its economy was in recession for the first time in seven years, with output contracting 0.1 percent in the third quarter as companies slashed investment to weather the financial crisis.
The country has historically enjoyed a large trade surplus thanks to brisk demand for its cars and other goods.
But the global economic crisis and a stronger yen are now taking a heavy toll on its export-dependent economy.
Policymakers at Japan's central bank met again Thursday, roughly three weeks after cutting the country's super-low interest rates for the first time in seven years to try to pump up the economy.
Analysts see little chance of another rate cut this week from the current level of just 0.3 percent after warnings from the central bank chief about the risks of very low borrowing costs.