Japan's April exports disappoint even as 'Abenomics' weakens the yen
Data underscores limitations of currency devaluation in bolstering Japan's trade
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 per cent annual increase in exports in April was below the median estimate for a 5.9 per cent rise and followed a 1.1 per cent 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 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 41/2-year low against the US dollar and boosted Tokyo shares by 70 per cent 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 raised fuel import costs and many analysts predict trade deficits to persist for the rest of the year. The data suggests 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.
"The economy is expected to stay on a moderate recovery path. It will be difficult to picture the economy being led by external demand. Instead, it will probably be supported by fiscal policy."
Exports to China rose 0.3 per cent year on year in April, while exports to the US jumped 14.8 per cent year on year, according to the data.
Imports jumped 9.4 per cent year on year in April, up for a sixth consecutive month, due to an increase in liquefied natural gas purchases, compared with a 6.7 per cent gain expected by economists.
That has brought the country's trade balance into a deficit of 879.9 billion yen (HK$66.6 billion) the biggest trade gap for an April under comparable data series going back to 1979, according to the finance ministry.
The economy grew 0.9 per cent in January-to-March from the previous quarter, led by firm private consumption and a pick-up in exports, with economists expecting the recovery to strengthen in the coming quarters.