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Japan's June exports fall less than expected, offer hope of recovery

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Japan's exports fell 7.4 per cent in June from a year earlier, Ministry of Finance data showed on Monday, as a strong yen weighed on the value of overseas shipments.

[TOKYO] Japan’s exports fell less than expected in June in a tentative sign that overseas demand could be recovering from persistent weakness that set in last year.  

A slowing decline in exports could ease concerns for Japan’s policymakers as they try to revive growth with stimulus spending on infrastructure after their structural reform plans failed to deliver hoped-for results. 

“Exports are showing signs that they have stopped deteriorating,” said Norio Miyagawa, senior economist at Mizuho Securities. “The US economy is a bright spot and should help Japan’s exports recover. The (Japanese) government’s stimulus plan is designed to help domestic demand, but without broader reforms they are just buying time.”

The 7.4 per cent annual decline in exports in June was less than the median estimate for a 11.6 per cent annual decline seen in a Reuters poll of economists, although it was the ninth consecutive monthly fall. In volume terms, exports rose 2.9 per cent in June from the same period a year earlier, the first increase in four months. 

The trade balance hit a surplus of 692.8 billion yen versus a 494.8 billion yen surplus seen in the poll. Exports fell in June on declines in shipments of cars and steel, the data showed.  

Exports to China – Japan’s largest trading partner – fell an annual 10.0 per cent in June, less than a 14.9 per cent annual decline in the previous month. US-bound shipments fell 6.5 per cent year-on-year, considerably less than the 10.7 per cent annual decline of the previous month.  

Imports were down 18.8 per cent year-on-year versus a forecast for a 19.7 per cent annual decline. The yen has risen around 13 per cent versus the dollar so far this year, and some

Japanese policymakers are worried about further gains that would severely erode exporters’ earnings and increase deflationary pressure by lowering import prices. 

The government is crafting a massive spending package worth about 20 trillion yen (S$255.8 billion), three government sources told Reuters last week. 

The BOJ is expected to ease monetary policy at a meeting ending on July 29, a Reuters poll of economists found, to boost anaemic inflation.