Japan's Exports Surge 40%

May 27, 2010
High demand for new cars, high tech products and factory parts

Japan's April trade surplus soared as exports rose for the fifth straight month to drive a tentative recovery in the world's second-largest economy, official data showed on May 27.

Booming demand for new cars, high tech products and factory parts have combined with a stimulus-driven domestic picture, helping Japan's biggest companies return to profit and boost capital spending.

Exports surged 40.4% on-year, the fifth straight month of growth and meeting analysts' expectations. Vehicle exports more than doubled while auto parts exports rose 61.7% on demand from China and the United States.

Growth of exports outpaced the rise in imports, which jumped 24.2% to 5.15 trillion yen, showing an increase for the fourth consecutive month, the government said. Exports to the United States also rose 34.5% to 878.4 billion yen, while imports gained 9.4% to 496.5 billion yen.

But analysts warned that risks loom on the horizon for Japan's export-led recovery as heightened anxiety over European debt has sent the safe haven yen soaring, which if sustained will dent exporters' repatriated profits.

Nevertheless, shipments to the EU rose 19.8% in April to 665.8 billion yen, while imports rose 5.2% to 442.3 billion yen.

Japan's trade surplus jumped to 742.3 billion yen (US$8.25 billion), up more than 14-fold from 48.99 billion yen logged a year earlier, the finance ministry said.

"The data reflected the current strength of the economy," said Hiroshi Watanabe, economist at Daiwa Institute of Research. It indicates that Japan is off to a strong start in the second quarter after gross domestic product grew by an annualized 4.9% in the January-March period and 1.2% on-quarter, the fastest in nearly a year.

In particular the auto sector, a major driver of the Japanese economy, has continued to lead the recovery as it stages a rebound after a period of heavy post-crisis restructuring, Watanabe said.

Global auto sales plunged in 2009 in part as banks, particularly in the United States, hesitated to issue loans for consumers to purchase vehicles at the height of the global financial crisis, crushing demand.

"The auto industry is one of pillars of the Japanese economy. (Its recovery) could affect corporate capital investment and employment conditions," Watanabe said.

Robust Chinese and Asian demand for autos and precision equipment continued to accelerate, data showed. China-bound exports jumped 41.4% to 1.15 trillion yen, with auto shipments surging 126.3%.

Shipments of scientific and optical instruments increased 88%.

While analysts do not foresee a sharp slowdown due to the eurozone's woes, they warn that the double whammy of a high yen and growth-sapping fiscal austerity in Europe may soften Japan's recent acceleration. "We are starting to see possible risks that may pressure external demand" for Japanese exports, said Masamichi Adachi, senior economist at JPMorgan Securities Japan. "A slowdown is unlikely. But risks are increasing for an actual fall (in foreign demand) and worsening corporate sentiment."

Copyright Agence France-Presse, 2010

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