Japan's exports fell the most in more than three years in December from a year earlier, stoking fears of economic contraction in the final quarter of 2015 as a slowdown in China and emerging markets takes its toll on the export-reliant economy.
The weak data should keep the Bank of Japan under pressure to act as early as at its January 28-29 review, as the collapse in oil prices weighs on inflation expectations while worries over a China-led global slowdown and a stock market rout sap business morale.
The central bank is expected to cut its inflation projection for the fiscal year from April to possibly below 1 per cent this week - far below its 2 per cent target - with the outcome of the two-day policy review seen hanging in the balance.
"The BOJ may ease policy again this week if stock prices plunge and the yen spikes to below 115 yen to the dollar, which would wipe out effects of a weak yen and derail efforts to generate a virtuous growth," Takeshi Minami, chief economist at Norinchukin Research Institute, said.
Ministry of Finance data on Monday showed exports fell 8.0 per cent by value in the year to December, down for the third straight month, marking the biggest drop since September 2012.
The volume of exports fell 4.4 per cent in December, down for a sixth straight month, a sign that the weak yen aspect of the government's "Abenomics" policies has struggled to boost exports, even as its value has fallen by more than a third versus the dollar since Prime Minister Shinzo Abe took office in late 2012.
Monday's data will be followed on Friday by a batch of other indicators including household spending, consumer inflation and factory output. Exports to China, Japan's biggest trading partner, fell 8.6 per cent in December from a year earlier, down for a fifth straight month, dragged down by shipments of chemicals and electronics parts.
Shipments to Asia, which accounts for more than half of Japan's exports, declined 10.3 per cent in December, the biggest annual drop since January 2012. Exports to the United States, another key market for Japanese goods, fell 3.4 per cent in December, marking the first annual decline in 16 months, due to falling shipments of mining machines, steel and metal processing machinery. For the full-year 2015, Japan's exports grew 3.5 per cent, up for a third straight year led by US-bound car shipments, while imports fell 8.7 per cent, down for the first time in six years due to the collapse in oil prices. That resulted in a trade deficit at 2.8 trillion yen ($23.57 billion).