Japan exports to US jump, trade deficit widens

TOKYO: Japan’s exports rose in May from a year earlier at the fastest pace in almost a year and a half due to solid demand from the US, but the trade deficit widened to the third highest level ever as energy imports surged.
The 10 percent annual rise in exports in May was more than then median forecast of a 9.3 percent annual rise and faster than a 7.9 percent annual increase in April in an encouraging sign that demand for Japanese goods can continue to weather global economic turbulence.
The trade deficit widened more than expected as Japan imported more fossil fuel to offset declining use of nuclear power, but economists say the trade deficit is likely to shrink in coming months as energy prices are now falling.
“Exports to the US could slow somewhat but are likely to continue to grow as US consumption is holding firm,” said Hiroaki Muto, senior economist at Sumitomo Mitsui Asset Management Co.
“China’s efforts to support growth are likely to bear fruit later this year, which will also help Japan’s exports. Energy prices are falling, so while there may be some time lag, this will eventually lead to lower imports and a lower trade deficit.”
The annual increase in exports was the largest since December 2010, when exports rose 12.9 percent from the same period a year earlier.
The deficit in the trade balance in May widened to 907.3 billion yen ($ 11.48 billion) against a projected deficit of 561.1 billion yen, Ministry of Finance data showed on Wednesday. In January, Japan recorded its biggest ever trade deficit of 1.481 trillion yen.
Imports rose 9.3 percent in May from a year earlier, against the median forecast for a 2.9 percent annual increase.
Japan’s economy grew an annualized 4.7 percent in the first quarter, and economists expect solid private consumption and rebuilding following last year’s disaster on March 11 to sustain growth this year. They forecast the economy will expand 2.3 percent in the fiscal year ending in March 2013. Political parties that support a bailout needed to save Greece from bankruptcy won a slim majority in an election on Sunday, easing concerns that Europe’s sovereign debt crisis is spiraling out of control.
There are still worries about whether a separate bank bailout for Spain will be enough to save its finance sector, which could eventually weigh on external demand.
China surprised investors earlier this month by cutting interest rates for the first time since the global financial crisis as Europe’s debt crisis weighs on its economic growth.