Japan’s Exports Rebound in Tailwind for Abe’s Policies

Japan’s exports rose more than forecast in July, bouncing back from two straight declines to support an economy that contracted last quarter by the most since a record earthquake in 2011.

Overseas shipments rose 3.9 percent from a year earlier, the finance ministry said in Tokyo today. That’s higher than the median estimate for a 3.8 percent gain in a Bloomberg News survey of 28 economists. Imports rose 2.3 percent, leaving a deficit of 964 billion yen ($9.36 billion).

The rebound in shipments may help Prime Minister Shinzo Abe to raise the sales tax again after boosting it to 8 percent in April. The economy is forecast to expand an annualized 2.9 percent this quarter after contracting 6.8 percent in the April-June period, as consumers and businesses cut spending after the tax increase.

“Exports are increasing but still lack strong momentum,” said Takeshi Minami, chief economist at Norinchukin Research Institute Co. in Tokyo. “Imports are stronger than expected, largely due to a seasonal rise in the cost of fuel imports, and not on domestic demand, which remains lackluster.”

The Topix index of shares declined 0.1 percent at 11:30 a.m. in Tokyo while the yen was little changed at 102.95 per dollar.

Stronger Asia

Exports to Asia climbed 3.4 percent and were up 2.1 percent to the U.S. in July, after shipments to both dropped in May and June. To the E.U., exports rose 10.2 percent, a 14th straight monthly increase.

China, Japan’s largest trading partner, took 1.13 trillion yen worth of goods in July, an increase of 2.6 percent from last year. Purchases by Asean nations were up 3.7 percent, with the 10 countries taking 15 percent of Japan’s exports.

Exports volumes were 5.6 percent higher in July compared with December 2012, when Abe took office, even as his reflationary policies have driven the currency down 17 percent against the dollar.

Imports tumbled an annualized 20.5 percent in the April to June period from the first quarter, while exports fell 1.8 percent, according to gross domestic product data announced by the Cabinet Office last week.

The Bank of Japan may cut its growth forecast for this year for a fourth time as exports have failed to bolster an economy weakened by the levy increase. The central bank’s board may lower its median forecast for 1 percent growth this fiscal year, according to people familiar with the central bank’s discussions.

Weaker Growth

Growth is likely to be 0.4 percent, according to the median estimate in a survey of 24 economists by Bloomberg News on Aug. 13-14.

The value of exports of motor vehicles rose 8.1 percent in July from a year earlier, with those to the E.U. jumping 74.3 percent and to Asia climbing 17.8 percent. Shipments of metal-working machines to China were up 61.2 percent. The value of crude oil imports rose 6.9 percent and natural gas rose 7.4 percent.

The BOJ is set to review its economic and price outlook at an Oct. 31 meeting. The government will decide by the end of the year whether to increase the levy to 10 percent from October 2015.

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