Japan's Exports Surge on Weak Yen, Narrowing Trade Deficit

Japan's Exports Surge on Weak Yen, Narrowing Trade Deficit

Japan's Exports Surge on Weak Yen, Strong Demand

Japan's exports surged 13.5% in May, exceeding expectations thanks to a weak yen and robust demand from the U.S. and Asia. The trade deficit narrowed to 1.22 trillion yen ($7.7 billion), with imports rising 9.5% to 9.5 trillion yen ($60 billion).

Exports reached 8.3 trillion yen ($53 billion), the fastest growth since November 2022. Shipments to the U.S. and Asia rose significantly, driven by vehicles, electronics, and machinery.

The weak yen boosted import costs, particularly for oil and gas, contributing to the deficit. However, rising prices played a major role in inflating both exports and imports.

Trade's impact on the economy was muted, with a 1.8% contraction in the first quarter. Despite this, trade with China is reviving, and the U.S. economy remains resilient.

The weak yen is a concern for policymakers, but it also benefits exports. The Bank of Japan is debating its impact on inflation, aiming for a gradual price increase while avoiding deflation.