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(Bloomberg) — Japan’s exports rose at a faster pace in July, largely reflecting the yen’s drop to a 38-year low last month.
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Exports gained 10.3% from a year ago led by chip parts and cars, accelerating from 5.4% in the previous month, the Ministry of Finance reported Wednesday. The result was broadly in line with the median economist estimate of a 11.5% increase.
Imports climbed 16.6%, compared with a 14.6% gain estimated by analysts. With a larger increase in imports, the trade balance turned back to a deficit of ¥621.8 billion ($4.3 billion).
The recovery in overseas shipments is a missing piece for the Bank of Japan as it carefully watches the economy and financial markets in their quest for a virtuous economic cycle. The central bank’s July 31 rate hike and hawkish signals from Governor Kazuo Ueda contributed to a global market meltdown earlier this month.
“I don’t think this will have much impact on BOJ’s view that Japan’s economy is recovering moderately,” said Takeshi Minami, chief economist at Norinchukin Research Institute. “But the biggest factor was a weak yen for both exports and imports.”
The value of July’s export shipments was boosted by a weak yen, which the finance ministry said traded at an average of 159.77 against the dollar in July, 12.3% weaker than a year ago. On a volume basis, exports fell 5.2% from a year ago.
The data also showed a clearer indication of a recovery in vehicle exports, after safety certification scandals weighed on that sector earlier this year.
Toyota Motor Corp., the world’s largest automaker, reported on Aug. 1 that its profits climbed in the latest quarter after a weak yen and robust demand in North America boosted sales. Analysts are projecting the Japanese manufacturer to post record profits this year.
“Automobile production is recovering, but has not yet returned to previous levels,” said Chisato Oshiba, an economist at Dai-Ichi Life Research Institute. “On top of that, demand itself is not strong due to a slowdown in overseas economies.”
By region, Japan’s shipments to the US gained 7.3%, slowing a little from the previous month. The pace of increase in exports to China remained unchanged at 7.2%, while shipments to the EU decreased 5.3%. China’s manufacturing activity unexpectedly shrank for the first time in nine months in July, according to a private survey, in a sign the country’s export machine might be cooling, darkening the economy’s outlook.
Japan’s economy registered its first growth in two quarters from April to June, expanding an annualized 3.1%, largely thanks to a rebound in consumer spending, according to a government report last week. Contribution from foreign demand was negative as growth in imports surpassed that of exports in the resource-scarce nation.
(Updates with more details from the report, economist comments.)
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