Japanese exports grew more than expected in January, supporting the country’s weak economy and another argument in favor of the Bank of Japan’s monetary policy easing.
The country’s exports rose 11.9% in January from a year earlier, beating economists’ forecast of 9.5% growth, the finance ministry said on Wednesday. Imports contracted for the tenth month in a row, down 9.6%, due to declines in coal and liquefied natural gas. It also beat the consensus estimate of an 8.7% decline.
The Lunar New Year holiday skews year-on-year comparisons as exports to China increased during that period. As a result, the country’s trade balance has shifted to a deficit of 1.76 trillion JPY (11.7 billion USD) from a revised surplus of 68.9 billion JPY in December.
The increase in exports, which followed a revised 9.7% rise in December, is good news for Japan after the economy unexpectedly slipped into recession in the final quarter of 2023 amid stagnant domestic spending.
Evidence that overseas demand is relatively stable is likely to support market expectations that the Bank of Japan may continue to move toward monetary policy normalization, which many economists expect to happen by April. The central bank’s board recently sought to reassure markets that the first rate hike since 2007 would not lead to radical changes as policy would remain accommodative.
“Demand for electronic products and chip-making machinery is recovering, and the decline in imports shows that inflation is stabilizing and helping consumer sentiment”, said Harumi Taguchi, chief economist at S&P Global Market Intelligence. “I think the Bank of Japan may follow through on its plan to raise interest rates in April”, added he.
Governor Kazuo Ueda reiterated last week that the regulator will continue to carefully analyze the data to assess whether the gradual economic recovery will continue.
Wednesday’s data also showed that seasonally adjusted exports fell by 3.6% from December, an indication that the underlying trend may be weaker than the overall data suggests.
“If you look at the global economy as a whole, it’s slowing down, so it doesn’t look like exports will be that big of a driver of economic growth”, said Takeshi Minami, chief economist at Norinchukin Research.
