-Akiyoshi Takumori, an economist at Sumitomo Mitsui Asset Management
Trade deficit of the world's third biggest economy narrowed sharply in June as exports rose, while energy import bill continues to decline. Japan's exports surged 9.5% on year in June, recording the fastest pace in five months and following the 2.4% growth in the preceding month. Exports destined for China, Japan's leading trading partner, surged 5.9% in June from a year ago, compared with May's 1.1% annual increase as shipments of electronics and plastics rose. Shipments to Asia soared 10.1% in annual terms in June, versus a 3.3% annual increase in the previous month. Japan's exports to the US leapt an annual 17.6% in June, far above the 7.4% recorded in May, due to higher shipments of cars and pharmaceuticals. Meanwhile, imports dropped 2.9% last month, compared with economists' expectations for a 4.0% annual decline and following the 8.7% fall in May. As a result, Japan's trade balance came to a deficit of 69.0 billion yen, shy of expectations for a 5.4 billion yen surplus. Despite the export pick-up, The Bank of Japan this month cut its annual growth and inflation forecasts for the world's third-largest economy, with economists warning weaknesses remained and the downgrade hinted at a weak second quarter. The economy grew 1.0% in January-March after recovering from recession in the last quarter of 2014, and business confidence remains strong. Yet, consumer spending continues to struggle after sales tax hike last year and the BoJ is expected to ramp up its monetary easing programme this year to reach the inflation goal.
© Dukascopy Bank SA