Japan’s exports rose 13.5% in May, with faster-than-expected growth helped by a weak yen and strong demand in the United States and Asia.
Finance Ministry data released Wednesday showed the trade deficit stood at 1.22 trillion yen ($7.7 billion), down nearly 12% from 1.38 trillion yen a year earlier. Imports rose 9.5% year on year to nearly 9.5 trillion yen ($60 billion).
Exports totaled 8.3 trillion yen ($53 billion) and grew at the fastest pace since November 2022. Shipments to the US rose nearly 24% and to the rest of Asia by more than 13%, driven by double-digit growth in vehicle, electronics and appliance shipments.
Trade with Europe largely fell.
The cost of Japan’s imports tends to rise when the Japanese yen loses value against the US dollar and other major currencies. The dollar is trading at nearly 158 yen, down from 140 yen a year ago.
Japan is a resource-poor country that imports almost all of its oil, and rising imports of oil, gas and other fuels are a major factor in May’s deficit for the second month in a row. Fruit imports also increased in May.
But an important factor behind the increase in both exports and imports was higher prices overall, pushing prices higher than a year earlier, according to a report by Marcel Tiliant of Capital Economics.
This can be seen in the muted impact of trade on the economy, which decreased by 1.8% in the first quarter of the year.
In fact, “most of the increase in trade volumes over the past year reflects rising prices due to the sharply weaker yen, rather than any discernible improvement in volumes,” it said.
However, trade with China, Japan’s second-largest export market after the United States, is reviving as its economy slowly recovers from the turmoil caused by the real estate crisis and the lingering effects of the COVID-19 pandemic.
Shipments of machinery and industrial components, as well as vehicles, showed strong growth.
Also US Economy remained resilient even as the Federal Reserve kept interest rates at record levels as it tried to curb persistently high inflation.
The yen’s weakness is causing some concern among Japanese policymakers. Minutes of a Bank of Japan meeting released Wednesday showed its leaders discussing the impact of a weak yen on inflation, which remains relatively low compared with other major economies.
Japan’s biggest fear is deflation as prices continue to fall. This is a sign of a weakening economy, and the central bank is trying to provoke a gradual rise in prices.
“But today’s trade data also showed that it is having a positive impact on exports,” Yep Jun Rong, market analyst at IG, said in a commentary.