Japan's exports fall as yen rises, quake disruption looms

By Tetsushi Kajimoto

TOKYO (Reuters) - Japan's exports fell for a sixth straight month in March as slowing growth in China, soft demand for electronic components for products such as the iPhone and a strengthening yen threatened to hold back the country's economic recovery.

Japanese electronics makers are unlikely to get much solace when Apple Inc reports its March quarter earnings next week. Analysts expect Apple to post its biggest-ever quarterly decline in iPhone shipments and present a weak sales forecast for the current quarter.

"A delayed recovery in the U.S. economy, slowdown in China, and sluggish demand for electronics parts on a cut in iPhone production were factors behind weak exports," said Hidenobu Tokuda, senior economist at Mizuho Research Institute.

The trade news came hard on the heels of a Reuters poll suggesting that although confidence at Japanese manufacturers rose in April it was expected to worsen again in the coming three months, reflecting worries over the strong yen and tepid overseas demand.

Weak indicators should add pressure on the government and the Bank of Japan (BOJ) to do more to stimulate growth, while a series of earthquakes that struck a southern manufacturing hub in the past week could hamper supply chain and economic activity ahead.

Analysts say the quakes could cause a sharp drop in the country's factory output of cars and other goods in April - an unwelcome development for a flagging economy - although the impact may be short-lived if the supply chain is repaired quickly.

The Ministry of Finance said exports fell 6.8 percent in the year to March, versus a 6.9 percent drop expected by economists, and followed a 4.0 percent fall in February.

Exports to China - Japan's largest trading partner - fell 7.1 percent in March, while the U.S.-bound shipments also dropped 5.1 percent year-on-year.

Exports to Asia, which accounts for more than half of Japan's shipments, fell 9.7 percent.

But exports to the European Union grew 12.1 pct in March, the biggest year-on-year gain since Feb 2011, driven by exports of ships to Italy and Greece, which grew fivefold from a year earlier, although that development is seen by the Ministry of Finance as a temporary blip.

In the Reuters Tankan taken April 1-15, exporters of cars and electronics complained about the rapid yen rise, which could dim Japan's recovery prospects and delay its recovery from two decades of deflation and stagnation.

The dollar so far this year is down about 10 percent on expectations that the United States would go slow in raising interest rates, prompting verbal warnings from Japanese policymakers against investors pushing up the yen too fast.

(Reporting by Tetsushi Kajimoto; Editing by Eric Meijer)