TOKYO • Japan's exports tumbled last month at the fastest pace since the global financial crisis, with a resurgent yen adding to the challenge of weak external markets - leaving the economy and the government more reliant on shaky domestic demand to drive growth.
The yen edged towards a seven-week high against the US dollar, prompting bureaucrats from the Finance Ministry, the Bank of Japan and the financial regulator to hold an emergency meeting to examine the current state of the market.
Japan's top currency czar reiterated a veiled threat to intervene in response to speculative moves, but traders say few options are available because it could be considered competitive devaluation, something the Group of Seven advanced economies frown on.
"We are constantly watching for speculative moves and will respond with the necessary steps if needed," Vice-Finance Minister for International Affairs Masatsugu Asakawa said after the meeting.
Policymakers are in a bind. Japan's exports have now fallen for 10 consecutive months, the longest losing streak since losses on United States subprime mortgages sparked a global financial crisis.
Still, intervention may be unable to stop the yen's rise, as long as investors pare back expectations for US interest rate hikes amid a run of spotty economic data and mixed signals from Federal Reserve officials.
Last month, exports fell an annual 14 per cent, which matched the median estimate in a Reuters poll of economists and was the fastest decline since October 2009.
Economists say there is a growing risk that weakness in exports will persist as global economic uncertainty shows little sign of receding, which could undermine Japanese policymakers' efforts to re-energise the economy.
"Exports do not have the strength required to lead Japan's economy," said Mr Norio Miyagawa, senior economist at Mizuho Securities. "This is a clear message that we need to support domestic demand. Government stimulus will help, but only in the short term."
Exports in July fell due to lower shipments of cars to the US, ships to Central America and steel to Italy, the data showed.
Exports to China - Japan's largest trading partner - fell an annual 12.7 per cent in July, extending the 10 per cent decline seen in June.
US-bound shipments fell 11.8 per cent year on year, versus a 6.5 per cent annual decline in the previous month.