Prospects of a private demand-led recovery were bolstered, however, by a capital expenditure indicator which registered its first monthly increase in three months.
Thursday’s mixed data follows the yen’s fall to a two-decade low against the dollar earlier this month, fueling fears of a deterioration in the terms of trade and an additional financial burden for the resource-poor Japanese economy due to increased import costs.
The weak yen, once seen as a boon to the export-driven economy, is now having less of an impact as shipments get smaller and smaller due to Japanese manufacturers’ continued shift to offshore production.
Japanese exports rose 12.5% in April from a year earlier, according to Finance Ministry data, driven by car shipments to the United States, slightly lower than the 13.8% rise expected by economists in a Reuters poll. It follows a 14.7% increase in March.
In a worrying sign for the outlook, shipments to China fell 5.9% in April, the biggest drop since March 2020, as heavy COVID-19 restrictions in major cities like Shanghai disrupted chains. of supply and paralyzed economic activity. Imports from China — Japan’s biggest trading partner — also saw the biggest drop since September 2020, the data showed.
“Import gains caused by rising crude oil prices and a weak yen mean a transfer of national wealth to oil-producing countries, robbing Japan of purchasing power,” said economist Takeshi Minami. in chief the Norinchukin Research Institute.
“As such, Japan’s economic recovery hinges on developments in the coronary situation in the country and in China, as the Shanghai lockdown has disrupted activity on the supply and consumption side.”
Imports rose 28.2% in the year to April, compared to the median estimate for a 35.0% increase, as the weak yen pushed up world prices for commodities already on the rise. Imports reached a record 8.9 trillion yen ($69.27 billion), surpassing exports by 8 trillion yen.
The result is a trade deficit of 839.2 billion yen, below the median estimate of a deficit of 1,150 billion yen, but posting a ninth consecutive month in the red.
Analysts have warned of the risks of cost-prolonged inflation for the fragile economy, with external factors, not domestic demand, pushing up the import bill.
“If zero-COVID policies are extended, it will have a very harsh impact,” said Taro Saito, executive research fellow at NLI Research Institute, adding that shipments to China account for more than a fifth of exports. from Japan.
Separate data showed on Thursday that machinery orders in Japan rose 7.1% in March from the previous month, compared with a 3.7% increase expected by economists in a Reuters poll.
This series of volatile data, considered a leading indicator of investment spending for the next six to nine months, provided a glimmer of hope for a recovery based on domestic demand.
Japan’s economy contracted in the first quarter as COVID-19 restrictions hit the service sector and soaring commodity prices created new pressures.
($1 = 128.4800 yen)