Japan, the third largest economy of the world managed to offset sluggish domestic demand by a rise in its exports in May which grew at the fastest pace in the month since 1980, along with a key gauge of capital spending, as Covid-19 vaccine roll out boosted business activity in many of the key markets.
A recovery in in shipments from last year’s pandemic induced plunge was largely reflected in the huge growth in exports. This was also a welcome sign for the economy which is struggling to stage a rebound from the poor performance in the first quarter even as the governments prolonged a state of emergency because of the Covid-19 pandemic.
According to analysts, the perception that the country’s central bank will stick with its ultra-easy policy at its June 17-18 policy meeting would be bolstered by the solid data of May, even though there were forecast of the Bank of Japan extending its pandemic-relief programmes to continue support an economic recovery that is still considered to be fragile. 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.
Driven by a boost in exports of cars to the United States, there was a 49.6 per cent year on year growth in exports of Japan in May, according to data released on Wednesday by the country’s Ministry of Finance even though it was lower than the 51.3 per cent growth rate that was forecast by economists in a Reuters poll.
The surge in exports in May was preceded by a 38 per cent rise in April and was the highest monthly increase since April 1980 when the country had reported a growth in exports of 51.4 per cent.
The recoil effect of a 28.3 per cent year on year drop in export in May of 2020 was also reflected in the rise in May 2021 exports for Japan.
The trade data showed that there was greater export of chip production equipment, hybrid cars and scrap copper to China which was the largest trading partner of Japan as trade with Beijing grew by 23.6 per cent.
Another key market for Japanese exports, the United States, also saw a rise in shipments by about 87.9 per cent in May which was primarily driven by cars and auto parts and was a record for year-on-year growth according to comparable data dating as far back as January 1980.
At the same time, there was a 27.9 per cent rise in imports in May compared to a median estimate for a 26.6 per cent rise which resulted in a trade deficit of 187.1 billion yen ($1.70 billion) compared to the median estimate for a 91.2 billion yen shortfall.
(Adapted from USNews.com)