Japan’s exports saw a robust 13.5 percent surge in May, exceeding expectations and driven by a weaker yen as well as strong demand from the U.S. and Asia.Â
Trade deficit narrows
Data from the Finance Ministry showed the country’s trade deficit narrowed to 1.22 trillion yen ($7.7 billion), down nearly 12 percent from a year earlier.
Imports grew 9.5 percent year-on-year, reaching nearly 9.5 trillion yen ($60 billion), while exports totaled 8.3 trillion yen ($53 billion) – the fastest growth since November 2022. Shipments to the U.S. surged nearly 24 percent, and exports to the rest of Asia rose more than 13 percent, led by double-digit increases in vehicles, electronics, and machinery. However, trade with Europe mostly declined.
Impact of weaker yen
The weaker yen, which is trading at nearly 158 yen per U.S. dollar compared to 140-yen levels a year ago, has contributed to the rise in import values. Japan, a resource-poor nation, imports most of its oil, and higher fuel prices have been a significant factor behind the trade deficit for the second consecutive month. Fruit imports also increased in May.
Prices driving trade values
Analysts note that the trade data highlights the positive impact of the weaker yen on exports, although the overall increase in trade values is largely attributed to rising prices rather than a marked improvement in trade volumes. The economy contracted at a 1.8 percent pace in the first quarter of the year, and the central bank has been trying to spur a gradual rise in prices to combat the larger fear of deflation.
Reviving trade with China
Despite the challenges, Japan’s trade with China, its second-largest single export market after the U.S., has been reviving as the Chinese economy slowly recovers from the shocks of the property sector meltdown and the lingering effects of the COVID-19 pandemic. Shipments of machinery, manufacturing components, and vehicles have shown strong growth.
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