Japan's annual export growth beat expectations in May as shipments to Asia and other developing countries helped delay the impact of a US slowdown on global demand.
Exports to the United States fell for a ninth consecutive, month and the data showed ripples spreading across the Atlantic. Exports to the European Union, which had been holding up, recorded their first annual drop in over two years. Economists said the impact of the US downturn would eventually spread to other parts of the world, hurting Japanese companies and putting a brake on the economy's longest post-war expansion.
The Ministry of Finance data did little to alter the market view that the Bank of Japan will keep interest rates steady this year. "The impact of the global economic slowdown is gradually appearing," said Takeshi Minami, chief economist at Norinchukin Research Institute. "It is basically impossible for the BOJ to raise rates at this point."
Exports climbed 3.7 percent from a year earlier, beating a median forecast in a Reuters poll for a 1.9 percent rise. Exports grew 3.9 percent in April. Demand for light oil from China and Southeast Asia and auto shipments to China, Russia and Australia boosted growth in May.
Exports to China - now Japan's No 1 customer - grew 12.3 percent, while those to Southeast Asia rose 11.9 percent. Shipments to Russia and Australia jumped 58.8 percent and 28.5 percent, respectively. Imports grew 4.4 percent in May from a year earlier, slower than the 8.4 percent rise forecast, as the average price for customs-cleared crude oil imports hit a record $107.61 a barrel.
As a result, the trade surplus fell 7.6 percent from a year earlier to 365.6 billion yen ($3.39 billion), compared with the 40 billion yen economists had expected. Japan's trade surplus has been shrinking as export growth slows while soaring crude oil and other raw material prices inflate import costs.
"The trend will persist as long as crude oil prices stay high and export growth slows, although that doesn't mean Japan's trade balance will fall into deficit as a trend because exports play a bigger part in the economy," said Yoshimasa Maruyama, an economist at BNP Paribas.
Japan's economy expanded 1 percent in January-March on export growth. Economists expect a slight contraction in the April-June quarter as energy costs rise and exports slow.
Exports to the United States dropped 9.5 percent in May and shipments to the European Union fell 1.1 percent. "Demand from Asia has so far been strong but I doubt if that will continue because a spike in crude oil will deprive many Asian countries...of purchasing power," Maruyama said.