Japan’s exports surged by 13.5% in May.

TOKYO
Japan’s exports surged by 13.5% in May, exceeding expectations, driven by a weak yen and robust demand in the U.S. and Asia.

According to Finance Ministry data released Wednesday, the trade deficit decreased nearly 12% to 1.22 trillion yen from 1.38 trillion yen a year earlier. Imports grew 9.5% year-on-year, reaching nearly 9.5 trillion yen.

Exports totaled 8.3 trillion yen, marking the fastest growth since November 2022. Shipments to the United States increased by nearly 24%, while those to the rest of Asia rose by more than 13%, with significant growth in vehicles, electronics, and machinery. Trade with Europe mostly declined.

The value of Japan’s imports typically rises when the yen weakens against the U.S. dollar and other major currencies. Currently, the dollar is trading at nearly 158 yen, up from about 140 yen a year ago.

Japan, which imports nearly all its oil, saw higher imports of oil, gas, and other fuels contributing to the deficit in May for the second consecutive month. Fruit imports also increased.

Marcel Thieliant of Capital Economics noted that rising overall prices inflated the value of both exports and imports compared to a year earlier, as reflected in the 1.8% contraction of Japan’s economy in the first quarter.

“Most of the increase in trade values over the past year reflects rising prices due to the sharp weakening of the yen rather than any marked improvement in volumes,” Thieliant’s report stated.

Trade with China, Japan’s second-largest export market after the United States, is reviving as its economy recovers from property sector issues and COVID-19 pandemic effects, with strong growth in machinery, manufacturing components, and vehicles.

Meanwhile, the U.S. economy remains resilient despite the Federal Reserve’s high interest rates aimed at controlling inflation.

Japanese policymakers are concerned about the weak yen’s impact on inflation, which remains relatively low compared to other major economies. The Bank of Japan’s meeting minutes, released Wednesday, showed discussions about the yen’s impact on inflation. Japan’s central bank aims to avoid deflation, a sign of economic weakening, by encouraging a gradual rise in prices.

Yeap Jun Rong, market analyst at IG, commented that the weak yen positively impacts exports despite broader economic concerns.