Daily Management Review

Japan's May Exports Likely Saw Largest Monthly Growth Since 1980


Japan's May Exports Likely Saw Largest Monthly Growth Since 1980
According to a Reuters poll, the exports of Japan in May likely increased at the largest monthly pace in four decades. However the increased numbers are largely reflective of the rebound of exports compared to the very low levels for the same month last year when international trade was ravages by the Covid-19 pandemic. 
With the improvement in Covid-19 vaccinations improving economic conditions in some key economies, policy makers and analysts across the globe are closely watching the extent to which there is growth in underlying demand recovery from the pandemic hit.
Japan has been able to offset lacklustre demand at home because of a marked recovery in the country’s exports and output driven by a surge in global demand. The domestic demand growth has been affected by the extension of the pandemic emergency curbs in Tokyo and other major areas.
Machinery orders and consumer prices, as well as a Bank of Japan policy meeting will be included in next week's key data.
The Reuters poll showed that Japan’s exports likely increased by 51.3 per cent year on year in May. That would be the sharpest monthly growth in the country’s exports since April 1980 when there was a 51.4 per cent surge in exports, said a finance ministry official. However the huge surge in exports also largely reflected the 28.3 per cent drop in exports in Mat of 2020 during the height of the pandemic.
Imports were forecast to have jumped 26.6% year-on-year in May, which would result in a trade deficit of 91.2 billion yen ($833.7 million).
"Exports in May... likely posted a larger gain than they did in the previous month," said Kenta Maruyama, an economist at Mitsubishi UFJ Research and Consulting. "On a (month-on-month) seasonally adjusted basis, they probably decreased slightly, though global demand from capital investment remains high."
Japan’s Finance Ministry is set to announce the trade data next Wednesday along with data on core machinery orders that does not include those for ships and electrical utilities.
According to the poll, there was a likely a year on year increase of 8 per cent in core machinery orders in April and to have gained 2.7 per cent from the previous month.
It is also expected that there was a 0.1 per cent year on year drop in May in the core consumer price index (CPI), which includes oil products but excludes volatile fresh food prices. That would be the first month when a year-on-year growth in price would be noted since March last year.
Economists also expect the policy interest rate of the Bank of Japan to be kept at minus 0.1 per cent and the 10-year Japanese government bond yield target at around 0 per cent at its policy meeting on June 17-18.