Japan’s exports surged 13.5% in May, growing faster than expected, driven by a weak yen and strong demand in the United States and Asia.
Data released by Japan’s Ministry of Finance on Wednesday showed that the trade deficit totaled 1.22 trillion yen ($7.7 billion), down nearly 12% from 1.38 trillion yen in the same period last year. Imports increased 9.5% year-on-year to nearly 9.5 trillion yen ($60 billion).
Exports totaled 8.3 trillion yen ($53 billion), growing at the fastest pace since November 2022. mechanical.
Trade with Europe has declined.
When the yen weakens against the dollar and other major currencies, Japan’s imports tend to grow. The dollar was trading near 158 yen, up from 140 yen a year ago.
Japan is a resource-poor country that relies on imports for almost all of its oil, and increased imports of oil, natural gas and other fuels were an important factor in the second consecutive monthly deficit in May. Fruit imports also increased in May.
But Marcel Thieliant of Capital Economics said in a report that an important factor behind the growth in exports and imports was an increase in overall prices, which caused their value to rise year-on-year.
This can be seen in the weak impact of trade on the economy, which shrank 1.8% in the first quarter of this year.
In fact, “much of the growth in trade volume over the past year reflects higher prices due to the sharp depreciation of the yen, rather than significant improvements in transaction volumes,” the report said.
Still, trade with China, Japan’s second-largest single export market after the United States, has been recovering as Japan’s economy slowly recovers from the collapse of its real estate sector and the lingering effects of the COVID-19 pandemic.
Shipments of machinery and manufacturing parts as well as vehicles showed strong growth.
Moreover, the U.S. economy remains resilient even as the Federal Reserve keeps interest rates at record levels in an attempt to curb stubbornly high inflation.
The weak yen is causing some anxiety among Japanese policymakers. Minutes of the Bank of Japan’s meeting released on Wednesday showed that its policymakers were discussing the impact of a weak yen on inflation, which remains relatively low compared with other major economies.
Japan is more worried about deflation, which means prices continue to fall. It’s a sign of economic weakness and the central bank has been trying to trigger a gradual rise in prices.
“But today’s trade data also highlights the positive impact it has on exports,” IG market analyst Yeap Jun Rong said in comments.
