Japan's exporters struggle in fifth month of slowdown

The slowdown poses a major risk for Japan's recovery. With lacklustre demand at home, the country has depended on high-growth countries such as China to fuel its economy.

But China's expansion is waning just as exporters face an onslaught from the yen, which hit a 15-year high against the US dollar this week. It weakened slightly today amid speculation that Japan's monetary authorities might intervene in the currency market for the first time since March 2004 to stem the rise.

An appreciating yen is toxic for exporters such as Toyota and Sony because it shrinks the value of profits and makes products less competitive overseas.

Growing political pressure could prompt the Bank of Japan to further ease monetary policy to try to weaken the yen, according to local media.

Prime Minister Naoto Kan today told business leaders that the government would consider steps to help the economy including currency intervention, according to the head of the Nippon Keidanren business lobby.

Hiromasa Yonekura said: "Stable currency moves are important. But the yen has been accelerating more than Japanese firms had expected."

Finance minister Yoshihiko Noda said he hoped to work closely with Japan's central bank. "When it is needed, we must respond with appropriate measures," he said.

Economists say the BoJ may decide to boost liquidity by expanding its three-month low-interest loan programme for financial institutions. The policy board's next meeting begins on September 6.