Japan Exports Surge as Global Trade Rebounds From Dismal 2020

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Japanese exports jumped again, climbing in April by more than a third from last year’s dismal level, as recovering global trade gave a needed boost to an economy that’s stalling at home amid new waves of the coronavirus.

Surging car and auto parts shipments helped power a 38% rise in Japan’s exports from a year earlier, according to figures Thursday from the finance ministry that beat all but one forecast from 26 surveyed analysts. The consensus was for a 30.8% gain.

Although the data give an inflated view of the strength of exports because they’re based on a comparison with 2020’s terrible figures, the report still shows trade bouncing back — a major positive for the global economy and Japan. Shipments climbed almost 8% compared with 2019.

A separate report showed Japanese machinery orders, a leading indicator of capital spending, gained in March from the prior month.

Key Insights

More export gains are good news for an economy struggling to quell new virus waves amid a slow vaccine drive. Weak consumer spending and business investment last quarter led to a bigger-than-expected GDP contraction and raised the risk of a double-dip recession.
Last month’s trade increase showed a broad-based recovery in world economies. Shipments to the U.S. and Asia rose the most since 2010, while those to the EU climbed the most since 1980, according to a ministry official.
“Demand itself is very strong led by the U.S., and Chinese exports,” said economist Hiroaki Muto at Sumitomo Life Insurance Co, adding that bottlenecks in semiconductor supplies could slow gains in months ahead. “‘I expect net exports to be positive for Japan’s 2Q GDP, although it wouldn’t surprise me if 2Q GDP overall was negative.”
A drop in the yen’s value gives Japan’s exporters another tailwind. The currency has fallen roughly 6% versus the dollar so far this year, increasing the value of repatriated profits for companies from Toyota to Hitachi (OTC:HTHIY).
What Bloomberg Economics Says…

“Looking ahead, we expect exports to come in above the pre-Covid level in May, supported by a recovery in European demand with progress on vaccinations. Shipments to the U.S. and China may increase at a slower pace.”

–Yuki Masujima, economist

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Imports rose 12.8% from the previous year, compared with analysts forecasting a 9% increase.
Shipments to the U.S. jumped 45.1%, while those to the EU climbed 39.6% and those to China gained 33.9%.
The trade balance was 255.3 billion yen ($2.3 billion) in the black. Analysts had expected a surplus of 147.7 billion yen.
Core machinary orders increased 3.7% in March versus the prior month, compared with a 5% rise forecast by analysts.