Japan's exports fell for the first time in nearly 2 - 1 - 2 years, dragged down by weak demand for light oil and chip-making equipment, underlining worries about a worldwide recession as key markets like China weakened.
Japan exports fell 0.3% in July, compared with a 0.8% decrease expected by economists in a Reuters poll. It was followed by a 1.5% rise in the previous month.
The Cabinet Office's separate data showed a key gauge of capital expenditures rose in June. However, manufacturers braced for Core Orders to slide during the current quarter, partly because of the impact of weak offshore demand.
The batch of data underscored fragility in Japan's export engine that helped underpin the second quarter of domestic product GDP growth, with car shipments and inbound tourism being the biggest contributors.
The economy is now experiencing the slack in private consumption that has suffered due to broader price hikes.
However, the prospect of a sharper global slowdown and a falling growth in its major market China has raised concerns about its prospects.
The concern about global growth was compounded by separate data showing sustained declines in Singapore's exports, seen as a gauge of overseas demand as trade flows dwarf the city-state's economy.
China remains weak and I don't see demand from Europe and America to accelerate further, said Toshi Minami, chief economist at Norinchukin Research institute.
Japan's largest trading partner, China, fell 13.4% year-on-year in July due to declines in shipments of cars, stainless steel and IC chips, following a 10.9 percent drop in June.
Japan's key ally, the United States, rose 13.5% year-on-year last month to log the largest increase in value on record, led by shipments of electric vehicles and car parts, after a rise of 11.7% in the previous month.
The Bank of Japan must be aware of the economic implications of the global economy. However, it would have no choice but to avoid any efforts to normalise monetary policy for the time being given the risk from external slowdown, Minami said.
At its July meeting, the Bank of Japan kept its yield curve control YCC targets unchanged but took steps to allow longer-term interest rates to rise more freely in line with increasing inflation and growth.
It also showed that imports fell 13.5% in the year to July, compared to the median estimate for a 14.7% decrease.
The trade deficit swung to a deficit of 78.7 billion yen $537.27 million compared to the median estimate for a 24.6 billion yen surplus.
Japan's core machinery orders rose 2.7% in June from the previous month.
Core orders, a highly volatile data series regarded as an indicator of capital spending in the coming six-to-9 months, decreased 5.8% compared to a year earlier.
Manufacturing surveyed by the Cabinet Office predicted core orders would fall 2.6% in the July-September quarter, a decline in exports that suggests growing pressure on Japan's economy.
On their own, July trade figures still point to a small boost from net exports across Q3, said Marcel Thieliant, head of Asia-Pacific at Capital Economics.
Even if that were the case, GDP growth will surely slow sharply, he said.