- Hidenobu Tokuda, senior economist at Mizuho Research Institute
Japan's trade shortfall widened to the largest level in five months in July, as exports declined due to weak demand in China and other key trading partners, whereas imports dropped by less than expected. Export growth of the world's third-biggest economy slowed last month to 7.6%, following a robust 9.5% annual increase in June, amid reduced shipments of cars and electronics to Asia. Faltering exports in the reported month indicated overseas demand in the September quarter may not be strong enough to help Japan's GDP recover from an annualized 1.6% contraction in the second quarter. Exports to China, Japan's top trading partner, climbed 4.2% in July from a year ago, down from June's 5.9% annual growth. In contrast, Japan's outbound shipments to the US surged an annual 18.8% in July, following the 17.6% annual increase a month earlier. At the same time, imports dropped 3.2% on year in July, compared with a 7.9% decline expected by economists. As a result, Japan's trade deficit was 268.1 billion yen in July against market prediction for a 56.7 billion yen and following a gap of 70.5 billion yen in the preceding month.
The Japanese economy is forecast to resume growing in the current quarter if consumer spending rebounds. However, faltering exports suggest the overall pace of growth may not be enough to foster the price growth to remove deflation threats.
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