-Tim Condon, the head of research of Asia at ING Financial Markets
Japan's May trade deficit narrowed more than it was originally expected, as both exports and imports registered losses, however, a sharp drop in shipments is raising concerns about future prospects.
The Ministry of Finance unveiled the trade deficit stood at 909 billion yen in May, following a gap of over 1 trillion yen in the fourth month. Nevertheless, it is a straight 23rd trade deficit. A report also showed exports fell an annualized 2.7% in May, posting the first drop in shipments since February 2013. The reading came significantly worse than it was expected and followed a 5.1% growth a month earlier. At the same time, imports sank 3.6% on an annualized basis, after a 3.4% rise in April. Unstable trade balance figures come as a result of changes in China's economic policies, as People's Bank of China aims to stabilize growth, meaning demand for Japan's goods will continue waning on the coming years. It is also worth mentioning that the Japanese Yen was trading around 102-mark versus the U.S. Dollar, compared with 95 level seen a year earlier, suggesting even a significant depreciation of the domestic currency is not boosting exports. In today's economy, with a very low-dollar value export growth, Shinzo Abe can only rely on strong export growth. Exports is a still of the main concerns for the government, however, a recent pickup in demand from Europe can partially offset smaller shipments to the world's second largest economy.
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