TOKYO – Japan’s exports rose at the fastest pace since 1980 in May and a key gauge of capital spending grew, helping the world’s third largest economy offset sluggish domestic demand as Covid-19 vaccinations boost business activity in key markets.
The jump in exports largely reflected a rebound in shipments from last year’s pandemic-driven plunge, but was a welcome sign as the economy struggles to rebound from the first quarter’s doldrums amid a prolonged coronavirus state of emergency.
The solid data will likely bolster the view that the central bank will stick with its ultra-easy policy at its June 17-18 policy meeting, although it may extend pandemic-relief programmes to back a fragile economic recovery. The government recently extended coronavirus emergency curbs in Tokyo and other major areas.
“We cannot count on private consumption, but an uptrend in exports and capital spending will help pick up the slack in the second quarter,” said Takeshi Minami, chief economist at Norinchukin Research Institute.
“Still, export growth may lack strength as a global chip shortage will put a drag on car production over the next half year or so,” he added.
Ministry of Finance data on Wednesday (June 16) showed exports grew 49.6 per cent year-on-year in May, versus a 51.3 per cent increase expected by economists in a Reuters poll, led by US-bound car shipments.
The jump followed a 38 per cent rise in April and marked the sharpest monthly increase since April 1980, when shipments surged 51.4 per cent.
May’s rise largely reflected the recoil effect of a 28.3 per cent plunge in May of 2020.
By region, exports to China, Japan’s largest trading partner, grew 23.6 per cent, led by chip production equipment, hybrid cars and scrap copper, the trade data showed.
Exports to the United States, another key market for Japanese goods, jumped 87.9 per cent in May, a record for year-on-year growth according to comparable data going back to January 1980, driven by cars and auto parts.
Imports rose 27.9 per cent year-on-year in May versus a median estimate for a 26.6 per cent gain, resulting in a trade deficit of 187.1 billion yen ($1.70 billion), against the median estimate for a 91.2 billion yen shortfall.
Separate data by the Cabinet Office showed core machinery orders, which serve as a leading indicator of capital expenditure in the coming six to nine months, rose 0.6 per cent in April from the previous month, below an expected 2.7 per cent gain.
The Cabinet Office left its assessment on machinery orders unchanged, saying a pick-up was stalling.
A government official said solid overseas demand for chip manufacturing equipment helped support external orders, which jumped 46.2 per cent in April, rebounding from a 53.9 per cent fall in March.
Core orders, which exclude those for ships and electrical utilities, grew 6.5 per cent year-on-year in April, versus an 8.0 per cent gain expected by economists, the data showed.