November 15, 2013 / 7:19 AM / 5 years ago

Japan exports seen rising at fastest in three years as demand recovers

TOKYO (Reuters) - Japan’s exports rose in October at their fastest pace in three years in a sign that overseas demand is picking up pace again, a Reuters survey showed, which could help ease concerns about the global economic recovery.

Workers load containers from trucks onto a cargo ship at a port in Tokyo August 19, 2013. REUTERS/Toru Hanai

However, the trade balance will likely remain mired in the red with Japanese imports expected to jump as the country imports fossil fuels to offset the shuttering of its nuclear power industry.

The data may offer some comfort to policymakers as export growth so far this year has been disappointing despite a 14 percent drop in the yen against the dollar.

Still, there are lingering worries that shipments will not be strong enough to pick up the slack should Japan’s domestic demand falter — a prospect that cannot be ruled out as a national sales tax hike next year could hobble consumer spending.

Moreover, business investment remains anemic and companies are shying away from boosting wages, headwinds that threaten to undercut Japanese Prime Minister Shinzo Abe’s drive to foster durable growth through aggressive fiscal and monetary stimulus.

“Exports did not do well in July-September, but an overseas recovery and a weak yen are supporting the outlook, so we expect exports to continue to rise,” economists at Dai-Ichi Life Research Institute said.

Exports rose 16.5 percent in October from a year earlier, according to a Reuters poll of 27 economists. That would mark the fastest growth since July 2010, when exports jumped 23.5 percent from the previous year.

The finance ministry will release the data on November 20 at 8:50 a.m.

Imports are forecast to have risen an annual 19.0 percent, faster than a 16.5 percent increase in the year to September, according to the poll.

That would bring the trade deficit to 813.5 billion yen ($8.14 billion), which would be the 16th straight month of trade deficits.

External demand subtracted 0.5 percentage point from GDP in July-September, more than the median estimate for a 0.4 percentage point subtraction, data on Thursday showed, as exports to Southeast Asia weakened amid large capital outflows from the region.

Japan’s trade data for October could provide an early sign of whether shipments to Asia have been able to recover.

Growth in the world’s third-biggest economy slowed in July-September as capital spending, personal consumption and exports moderated.

Growth will quickly rebound as shoppers rush to spend before a national sales tax is increased to 8 percent from 5 percent in April, economists say. But the government’s policies are struggling to gain traction on key areas that would indicate longer-lasting changes to the economy, such as labor reform, deregulation and wage growth.

Editing by Shri Navaratnam

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