A weak yen is pushing Japan’s exports to grow at the fastest pace since Nov. 2022
Japan’s exports rose 13.5% in May, faster-than-expected growth helped by a weaker yen and stronger demand in the US and Asia.
Finance Ministry data reported on Wednesday showed the trade deficit reached 1.22 trillion yen ($7.7 billion), down about 12% from 1.38 trillion yen a year earlier. Imports grew 9.5%, year-on-year, to about 9.5 billion yen ($60 billion).
Exports reached 8.3 trillion yen ($53 billion) and grew the fastest since November 2022. Exports to the United States were up nearly 24% and those to the rest of Asia rose more than 13%, led by growth in double digits in shipping. cars, electronics and machinery.
Trade with Europe fell sharply.
The value of imports from Japan tends to increase when the Japanese yen loses value against the US dollar and other major currencies. The dollar is trading at around 158 yen, down from 140-yen levels last year.
Japan is a resource-poor country that imports almost all of its oil, and higher imports of oil, gas and other fuels are the main reason for the deficit in May, the second month in a row. Imports of fruit also gained in May.
But the biggest factor behind the increase in exports and imports was the increase in overall prices, which increased their value compared to last year, said Marcel Thieliant of Capital Economics in a report.
That can be seen in the muted impact of trade on the economy, which slowed to 1.8% in the first quarter of the year.
In fact, “much of the increase in trading prices last year reflects rising prices due to the sharp weakness of the yen rather than any significant improvement in volumes,” it said.
Still, trade with China, Japan’s second-largest export market after the United States, has been recovering as its economy slowly recovers from the shock of the collapse of its infrastructure sector and the lingering effects of the COVID-19 pandemic.
Exports of machinery and manufacturing components and vehicles showed strong growth.
Also, the US economy remains strong as the Federal Reserve has kept interest rates at record levels to try to curb stubborn inflation.
The yen’s weakness is the cause of some irritation among Japanese policymakers. Bank of Japan meeting minutes released on Wednesday showed policymakers debating the impact of a weak yen on inflation, which remains low compared to other major economies.
Japan’s biggest fear is inflation, where prices keep falling. That is a sign of economic instability, and the central bank has been trying to raise rates gradually.
“But today’s trade data also highlighted that it has a positive impact on exports,” Yeap Jun Rong, a market analyst at IG, said in a statement.
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