Japan exports disappoint, full benefits of weak yen yet to show

Tue May 21, 2013 8:54pm EDT
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By Tetsushi Kajimoto

TOKYO (Reuters) - Japan's exports rose less than expected in April from a year earlier due to weak demand from Europe and China, highlighting the challenges confronting the world's third-biggest economy as policymakers try to engineer a sustained revival.

The 3.8 percent annual increase in exports in April was below the median estimate for a 5.9 percent rise and followed a 1.1 percent increase in the year to March.

The result also underscores the limitations of a weak yen in bolstering the trade sector, especially as external headwinds crimp demand for exports.

The uncertainty was underlined recently by a string of weak data from the United States and China, Japan's major export markets.

Prime Minister Shinzo Abe's policy mix of sweeping fiscal and monetary stimulus, dubbed "Abenomics", has driven the yen to a 4-1/2 year low against the dollar and boosted Tokyo shares .N225 by 70 percent since November.

However, the benefits of a weak yen has not been fully reflected in the trade sector, partly because manufacturers have been moving production overseas.

The drop in the currency has so far sharply raised fuel import costs and many analysts predict trade deficits to persist through this year. The data suggest that a weak yen is not the cure-all for the Japanese economy that it once was.

"The yen's weakness has pushed up values of both exports and imports, but the benefits from a weak yen have not appeared in export volumes yet," said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance.   Continued...

A Japanese flag flutters in front of a shipping container area, at a port in Tokyo December 19, 2012. REUTERS/Yuriko Nakao