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Japan export slowdown could weigh on Q2 GDP growth

A container is loaded onto a flatbed truck from an international freighter at the international cargo terminal at Tokyo's port on May 25, 2015.

[TOKYO] Japan's export growth slowed for a second straight month in May, with weak external demand now threatening to erode economic growth in the current quarter.

Ministry of Finance (MOF) data showed exports grew 2.4 per cent year-on-year in May, less than a 3.5 per cent gain seen by economists and a 8.0 per cent rise in the prior month. Compared with April, exports fell 2.7 per cent.

Export growth, in tandem with domestic demand, is seen as crucial for building on the momentum evident from recent data showing stronger-than-expected economic expansion - led by corporate capital expenditure at the start of the year.

The data will be scrutinised by the Bank of Japan, which is expected to keep its monetary stimulus programme unchanged at its policy review later this week, after having offered a slightly more upbeat view of the economy last month.

"Exports are undoubtedly weak and the momentum is stalling due to slowdown in China," said Takeshi Minami, chief economist at Norinchukin Research Institute.

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"Exports are likely to keep a drag on economic growth, which could grind to a halt or turn negative in the current quarter given weak private consumption and external demand."

Shipments to China, Japan's largest trading partner, grew 1.1 per cent, slowing from a 2.4 per cent gain in April. China-bound car exports nearly halved from a year ago.

Exports to Asia, which account for more than half of Japan's shipments, rose 3.3 per cent, after a 6.0 per cent gain in April.

Exports to the United States, a key market for Japanese goods, rose 7.4 per cent in the year to May, led by car shipments but slowed sharply from the prior month's 21.3 per cent gain. US-bound export volume fell for the first time in six months.

Imports fell 8.7 per cent in the year to May due to annual declines in energy prices, versus the economists' median estimate for a 7.5 per cent decline. That brought the trade balance to a deficit of 216 billion Japanese yen (S$2.35 billion), roughly in line with a 226.0 billion yen deficit expected.

Revised gross domestic product data showed this month export growth slowed to 2.4 per cent in January-March from 3.2 per cent in the previous quarter, reflecting slowdown in the US and Chinese economies.

Imports outpaced exports, causing external demand to shave 0.2 per cent off first-quarter economic growth.

The Japanese currency hit a 13-year low above 125 yen to the dollar this month before gaining some ground, but is down about 20 per cent for the year.


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