Japan Exports Jump by 50% on Record Gains to the U.S. and Europe By Bloomberg

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Japan’s exports surged by nearly 50% from last year’s dismal level, as record jumps in shipments to the U.S. and Europe helped boost an economy still struggling with the virus at home.

The value of overseas shipments jumped 49.6% in May compared to a year earlier, when the world economy was suffering under pandemic lockdowns, according to finance ministry figures released Wednesday that were largely in line with the median forecast from analysts. It was the biggest gain since April 1980.

Shipments of cars and auto parts more than doubled, despite a shortage of semiconductors that has crimped vehicle production in the U.S. and other markets.

Still, economists warned that the data give an inflated view of the strength of Japan’s exports because they’re based on a comparison with 2020’s terrible figures, pointing out that the value of shipments was flat compared with April on a seasonally adjusted basis. Compared with 2019’s level, exports rose more than 7%.

Key Insights

• “The biggest reason behind the jump this time is the fact that exports took a major hit last year with the lockdowns in the U.S. and Europe,” said economist Harumi Taguchi at IHS Markit, adding that auto exports were holding up well but factory stoppages could start to show up in the data this month.
• With Japan’s consumers and service businesses still dealing with restrictions to contain the virus, the economy will need strong exports to help it eke out growth after last quarter’s contraction. Increasing imports, however, could largely cancel out gains in gross domestic product data.
• Japan’s latest state of emergency, which calls on restaurants and bars in big cities to close early, is set to end June 20, but some limits are likely to stay in place due to concern about the recent spread of more contagious variants of the virus. It could take a few more months for Japan’s vaccine drive to reach enough people to slow the spread.
• Profits at Japanese exporters have been helped by a drop of more than 6% in the yen versus the dollar this year. Downward pressure on the currency is likely to persist because of diverging central bank policies, with the Bank of Japan expected to stick with its stimulus, while the Federal Reserve is seen moving toward tapering.

What Bloomberg Economics Says…

“Export growth could gradually slow on a real basis in the coming months. Without a recovery in domestic demand, the economy could face difficulty rebounding in the third quarter.”

–Yuki Masujima, economist

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• Shipments to the U.S. gained 87.9%, while those to the EU climbed 69.6%. Both records in comparable data going back to 1980.
• Exports to China, a market that was already starting to recover last May, climbed 23.6%.
• A 27.9% increase in imports, the most since 2010, contributed to a 187.1 billion yen ($1.7 billion) trade deficit.
• A separate report showed Japanese machinery orders, a leading indicator of capital spending, rose 0.6% in April from the prior month.

(Adds economist’s comments.)

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