Japan export growth cools

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By Makiko Yamazaki and Tetsushi Kajimoto

TOKYO- Japanese exports rose in June for a seventh straight month, but the pace of growth slowed to its lowest since late last year, data showed on Thursday, underscoring concerns that a slowdown in China may hamper Japan’s trade-reliant economy.

Slowing exports could dash policymakers’ hopes that solid external demand may more than offset weak domestic consumption. Japan’s economy has been expected to emerge from a sharper-than expected contraction in the first quarter.

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Data from the Ministry of Finance (MOF) showed Japanese exports rose 5.4 percent  year-on-year in June, smaller than a 6.4 percent  increase expected by economists in a Reuters poll and cooling from 13.5 percent  growth in May.

Japan’s weak yen, which has languished at 38-year lows, boosted the value of exports, but volumes fell 6.2 percent  in June.

“Apart from a weak yen boost, you cannot expect the United States, Europe or China to grow strong enough to back Japan’s exports,” said Takeshi Minami, chief economist at Norinchukin Research Institute. “There’s no export growth engine around the world.”

By destination, exports to China by value rose 7.2 percent  year-on-year in June, led by demand for chip-making equipment, the trade data showed, but growth slowed from the 17.8 percent  increase in May.

Shipments to the United States, Japan’s ally and a key market, grew 11 percent  year-on-year in June, while those to the European Union fell 13.4 percent.

Imports by value grew 3.2 percent  in June from a year earlier, versus a 9.3 percent  increase expected by economists, swinging the trade balance into a surplus of 224 billion yen ($1.44 billion).

It was the first trade surplus in three months. Estimates were for a deficit of 240 billion yen.

Imports had risen 9.5 percent  in May.

Japanese manufacturers became more confident about business conditions in July whereas those in the service sector cooled, the monthly Reuters Tankan survey showed, reflecting a patchy economic outlook.

The poll of 506 large non-financial firms comes two weeks before the Bank of Japan (BOJ) holds its July 30-31 policy review. Investors are seeking clues on when the BOJ may raise interest rates, after doing so in March for the first time since 2007 and then deciding last month to reduce its bond-buying.

The central bank will scrutinize its own tankan – or short-term outlook – as well as other data for signs of a sustained rate of inflation and strong household consumption backed by wage hikes, which could strengthen the case for more rate hikes.

In the Reuters Tankan poll, which closely tracks the BOJ’s tankan, the sentiment index for manufacturers stood at plus 11, up five points from June and its first gain in four months.

However, manufacturers expect the index to fall back to plus 10 over the next three months.

The Reuters Tankan service-sector index fell for the first time in three months, to plus 26 from plus 31 a month earlier. Non-manufacturers expect the index to be plus 27 in October.

The Reuters Tankan indexes are calculated by subtracting the percentage of pessimistic responses from optimistic ones. A positive figure indicates optimists outnumber pessimists.  -Reuters

 

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