Japan’s exports fell less than expected in June in a tentative sign that overseas demand could be recovering from persistent weakness that set in last year.
Slowing decline in exports could ease concerns for Japan’s policymakers as they try to revive growth via stimulus spending on infrastructure after their structural reform plans failed to deliver hoped-for results. “Exports are showing signs that they have stopped deteriorating,” said Norio Miyagawa, senior economist at Mizuho Securities.” The US economy is a bright spot and should help Japan’s exports recover.
The (Japanese) government’s stimulus plan is designed to help domestic demand, but without broader reforms they are just buying time.” In its monthly economic report, the government said business sentiment has worsened, suggesting a much-awaited rebound in domestic demand is not guaranteed as companies may delay investment due to worries about overseas economies.
The 7.4% annual decline in exports in June was less than the median estimate for a 11.6% annual decline seen in a Reuters poll of economists, although it was the ninth consecutive monthly fall.
In volume terms, exports rose 2.9% in June from the same period a year earlier, the first increase in four months.
The trade balance hit a surplus of ¥692.8bn versus a ¥494.8bn surplus seen in the poll.
Exports fell in June on declines in shipments of cars and steel, the data showed.
On a positive note, Japan’s exports of food, medicines and finished metal products rose in June from a year ago.
Exports to China – Japan’s largest trading partner – fell an annual 10% in June due to falling shipments of chemicals and metal processing equipment.
That was less than a 14.9% annual decline in the previous month as an increase in shipments of cars to China helped offset a decline in other exports.
US-bound shipments fell 6.5% year-on-year, considerably less than the 10.7% annual decline of the previous month due to a pick-up in food exports.
Japanese shipments to the European Union fell 0.4% year-on-year in June, less than a 4% annual decline in May.
Exports to Britain rose 3.7% annually in June, versus a 0.7% annual decline in the previous month, although there are worries that Brexit could yet disrupt international trade.
Japan’s imports were down 18.8% year-on-year versus a forecast for a 19.7% annual decline.
The yen has risen around 13% versus the dollar so far this year, and some Japanese policymakers are worried about further gains that would severely erode exporters’ earnings and increase deflationary pressure by lowering import prices.
The government kept its assessment of the economy unchanged in its monthly economic report released earlier yesterday but said business sentiment had worsened.
The Bank of Japan’s tankan survey found the corporate mood stagnated in April-June due to a strengthening yen.
The government is crafting a ¥20tn ($187.93bn) spending package to stimulate the economy, three government sources told Reuters last week.
The BoJ is expected to ease monetary policy at a meeting ending on July 29, a Reuters poll of economists found, to boost anaemic inflation.