By Stanley White
Wednesday's trade data comes during a two-day summit between U.S. President Donald Trump and Japanese Prime Minister Shinzo Abe that threatens to put Japan in the crosshairs of Trump's protectionist trade policies.
While the trade surplus with the United States narrowed slightly by 0.2 percent year-on-year to 623.1 billion yen ($5.82 billion) in March, it was still sizable enough to draw criticism from Trump.
The backdrop of rising trade tensions, stoked by the bitter U.S.-China tariff standoff, have roiled financial markets as investors worried about their impact on global growth.
Growth in export-reliant Japan could be undermined in the event of a hit to world trade, or if the United States seeks measures to lower its trade deficit with the world's third-biggest economy.
"Exports can continue to grow, because there is overseas demand for capital goods," said Yusuke Ichikawa, senior economist at Mizuho Research Institute.
"We need to watch for risks posed by trade policy, because there is a sense Japan will have to make some concessions to the United States."
In March, the data showed shipments grew 2.1 percent from the same period a year ago, below the 4.7 percent annual increase expected by economists in a Reuters poll. In February, exports grew 1.8 percent.
The yen was 6.3 percent higher versus the dollar in March compared to the same period a year ago, finance ministry data showed. This weighed on the value of Japan's exports.
In volume terms, Japan's exports rose 1.8 percent year-on-year in March, reversing a 2.1 percent annual decline in February, a reason to not become overly pessimistic, Ichikawa said.
Exports in March were supported by an increase in shipments of cars, and semiconductor manufacturing equipment, the data showed.
Japan's exports to the United Sates rose 0.2 percent year-on-year, much slower than a 4.3 percent annual increase in February.
Since taking office last year, Trump has pushed to re-write free-trade deals to secure more protection for U.S. exports and jobs.
The U.S. president has imposed tariffs on steel and aluminium imports, which affect Japanese companies, and has also criticised Japan for its low number of U.S. auto imports.
At the summit with Trump, Tokyo is eager to avoid being pushed into talks on a two-way free trade agreement aimed not only at market access but at monetary and currency policies.
Japan's exports to the European Union slowed sharply to a 0.3 percent annual increase in March from an 11.5 percent increase in February, which could raise some concern about demand from Europe.
In one positive sign, Japan's exports to China jumped 10.8 percent in March from a year ago, rebounding from a 9.7 percent decline in February as factories resumed operations after the Lunar New Year holidays.
Economists expect Japan's exports to expand at a slower pace than last year due to a tapering off in demand for semiconductors and electronic parts.
($1 = 107.1200 yen)
(Reporting by Stanley White; Editing by Shri Navaratnam)
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)