Japan exports up for 2 straight years but global headwinds point to soft outlook

TOKYO  -Japan posted two straight years of export gains, led by solid U.S.-bound shipments of cars, although expectations of a strong recovery in demand are quickly fading amid global monetary tightening and worries about banks worldwide.

The world’s third-biggest economy has struggled to make a solid post-COVID recovery, undermined by lackluster household consumption and a global slowdown. Slowing shipments to China have also shattered policymakers’ hopes for a quick rebound from the pandemic doldrums.

The trade data by the Ministry of Finance (MOF) showed on Thursday Japan’s exports grew 6.5 percent year-on-year in February, undershooting a 7.1- percent increase expected by economists in a Reuters poll. It followed a 3.5 percent rise in the previous month.

Imports rose 8.3 percent, versus the median estimate for a 12.2- percent increase, resulting in a trade deficit of 897.7 billion yen ($6.75 billion).

It marked the biggest trade shortfall for the month of February.

The Japanese economy narrowly averted a recession in the final months of 2022, as consumption remained weak while exports were hampered by slowdown in global growth.

Monetary tightening across the world, supply chain constraints and the Ukraine war have undercut Japan’s recovery.

In a glimmer of hope for a potential pick-up in private demand, the leading gauge of business investment showed a strong reading on Thursday.

Core machinery orders rose 9.5 percent in January from a year earlier, the biggest monthly hike in more than two years.

Orders from service-sector companies jumped 19.5 percent to a level last seen in November 2019, as they ramped up investments for post-pandemic demand.

However, orders from manufacturing companies fell 2.6 percent dragged down by IT and auto firms amid weak global economy and semiconductor needs.

($1 = 132.9600 yen)

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Japan logs record merchandise trade deficit in Jan as export growth slows