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May 22, 2024

Japan’s Exports Rise for Fifth Consecutive Month in April Amid Weak Yen, but Volume Struggles

Japan’s exports saw an increase for the fifth consecutive month in April, bolstered by the weak yen, according to government data released on Wednesday. Despite this rise in export value, the volume of shipments remained under pressure due to soft global demand.

The latest trade data presents a mixed picture for policymakers who had hoped that robust export performance might offset the ongoing weakness in domestic consumption. However, the reality of sluggish export volumes, coupled with lackluster recovery efforts from China, Japan’s largest trading partner, and a decelerating U.S. economy, complicates this goal.

According to the Ministry of Finance, Japan’s exports grew by 8.3% in April compared to the same month last year. This increase fell short of the 11.1% rise anticipated by analysts polled by Reuters. In terms of volume, Japanese shipments actually declined by 3.2% year-on-year, marking the third consecutive month of decreasing export volumes.

Takeshi Minami, chief economist at Norinchukin Research Institute, commented on the situation, noting that, “The weak yen and global inflation appear to push up exports in value, but export volumes underline weakening global demand. Exports remain soft for the time being as pent-up demand for automobiles runs its course.”

This data arrives as Japan strives to achieve sustainable growth, which policymakers believe hinges on higher wages and persistent inflation. Such economic conditions are deemed necessary for the central bank to consider moving away from its near-zero interest rate policy.

The broader economic context is challenging. A week prior, data revealed that Japan’s economy contracted by 2% in the first quarter, with a significant 5% decline in exports of goods and services, leaving the economy in search of a growth driver.

Imports also rose by 8.3% in April, driven by higher costs for crude oil, airplanes, and computers. This increase turned Japan’s trade balance to a deficit of 462.5 billion yen ($2.96 billion).

In addition to trade challenges, business sentiment in Japan remained steady in May. However, manufacturers and service-sector firms expressed concerns over inflationary pressures exacerbated by the weak yen, which have been squeezing profit margins, according to a Reuters monthly survey.

Further complicating the outlook, manufacturers surveyed by the Cabinet Office forecasted a 1.6% decline in core machinery orders for this quarter. These orders are seen as a leading indicator of capital spending in the coming six to nine months, suggesting potential difficulties ahead for the industrial sector.

In summary, while Japan’s export values continue to rise, the decrease in export volumes and the broader economic challenges point to a complex economic landscape. Policymakers are tasked with balancing the benefits of a weak yen against the downsides of inflation and global demand uncertainties, all while aiming to stimulate sustainable domestic growth.

Jhumpa Lahiri

Jhumpa Lahiri

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