/www.bloomberg.com/ By Daisuke Takato
Tokyo, Feb. 24 (Bloomberg) -- Japan's exports fell for a second month in January, threatening to derail an economic recovery, as Fuji Photo Film Co. and other exporters say the threat of a war in Iraq is hampering sales.
Exports dropped 5.1 percent from December, seasonally adjusted, and imports slid 3.5 percent, the Ministry of Finance said. The trade surplus narrowed to 676.2 billion yen ($5.7 billion) from a revised 775.3 billion yen in December.
Overseas sales by Fuji Photo, Pioneer Corp. and other Japanese companies helped drive 0.5 percent economic growth in the fourth quarter, helping sustain a recovery as consumer spending stalled. The slump in exports puts more pressure on a new Bank of Japan governor, due to be appointed this week, to revive demand inside the world's second biggest economy.
``We can't be bullish,'' said Tasuku Imai, senior executive vice president at Fuji Photo, the world's second-largest photography company. A war would damp demand for film and other products, he said.
The yen was at 118.42 to the dollar at 10:27 a.m. in Tokyo, from 118.70 late Friday in New York. The surplus was in line with the median of 10 forecasts in a Bloomberg News survey for a 688.5 billion yen surplus.
In the Mood
The slump in exports may dampen consumer confidence already shaken by a record jobless rate and falling wages, economists say. Consumer spending, which accounts for about 55 percent of the economy, rose 0.1 percent in the fourth quarter, slower than the 0.8 percent gain in the third.
``The outlook for exports is bad, especially with the possibility of war increasing,'' said Akio Makabe, chief economist at Mizuho Research Institute.
Any U.S. and U.K. military assault on Iraq to force it to comply with United Nations resolutions to disarm would lead to higher oil prices, restrictions on shipping by air and sea and may curb consumer confidence, Japanese executives said.
``If war breaks out few people will be in the mood to go shopping for home theaters,'' said Katsuhiro Abe, executive vice president of Pioneer, which makes DVD recorders and plasma-display screens.
Exports may also be hurt as companies such as Toyota Motor Corp. and Honda Motor Co. move factories overseas. Toyota, Japan's biggest carmaker, says it will export 5.9 percent fewer cars this year. Honda, Japan's second-biggest carmaker, said it expected a 12 percent drop.
Not Spreading
Finance Minister Masajuro Shiokawa said the decision on a new Bank of Japan chief may be announced as soon as this afternoon. The government has repeatedly complained that current incumbent Masaru Hayami, whose five-year term ends March 19, has done too little to increase money supply to stem a four-year slide in prices.
Export growth ``isn't diffusing to the rest of the economy,'' said Taro Saito, an economist at NLI Research Institute.
Mitsukoshi Ltd., Japan's second-largest department store operator, last month said it would cut 460 jobs, or 3.7 percent of its workforce, by February 2004. Mitsukoshi in October cut its full-year profit forecast 8.3 percent for the fiscal year ending Feb. 28 after first-half profit fell 16 percent.
From a year earlier, the trade surplus narrowed to 105 billion yen, the same report showed today. Exports rose 7.9 percent, and imports rose 10.7 percent. The yearly figures aren't adjusted for seasonal variations.
Japan's trade surplus tends to shrink in January compared with the same month of the previous year because the country exports less during its New Year's holiday period while it still imports goods from other countries that celebrate Christmas. Japan last had a trade deficit in January 2001, of 98.5 billion yen.