Japan's exports extend gains, machinery orders fall amid fragile recovery

TOKYO : Japan's exports marked a fifth straight month of double-digit growth in July, driven by U.S.-bound shipments of automobiles in a positive sign for an export-led economy, although a key gauge of capital spending fell for the first time in four months.

The mixed batch of indicators underscored fragility in the world's third-largest economy, which grew https://www.reuters.com/world/asia-pacific/japans-economy-rebounds-april-june-covid-clouds-outlook-2021-08-16 1.3per cent in the April-June quarter due to solid exports and a surprise gain in private consumption.

However, prolonged coronavirus curbs on bars, restaurants and other face-to-face service sector businesses cloud the outlook, piling pressure on Prime Minister Yoshihide Suga to deploy another big stimulus package.

Ministry of Finance data out on Wednesday showed Japanese exports grew 37.0per cent year-on-year in July, a tad slower than a 39.0per cent increase expected by economists in a Reuters poll, although the gain was exaggerated by the contrast to the prior year's COVID-induced slump.

It followed a 48.6per cent growth in the prior month.

By region, exports to China, Japan's largest trading partner, rose 18.9per cent in the year to July, led by chip-making equipment and plastic, the data showed.

U.S.-bound shipments, another key market for Japanese goods, grew 26.8per cent in July led by exports of cars, car parts and motors, it showed.

Imports rose 28.5per cent in the year to July, versus the median estimate for a 35.1per cent increase, bringing the trade balance to a surplus of 441 billion yen (US$4 billion), compared with the median estimate for a 202.3 billion yen surplus.

Brisk external demand has helped underpin Japan's factory activity although a global chip shortage and signs of stalling in China's economic recovery are sources of concern.

Separate data by the Cabinet Office showed core machinery orders, a highly volatile indicator of capital spending for the coming six to nine months, fell 1.5per cent in June from the previous month, versus a 2.8per cent decline expected by economists in a Reuters poll.

Year-on-year, core orders, which exclude those of ships and electricity utilities, jumped 18.6per cent in June, a third straight month of annual gain, prompting the Cabinet Office to maintain its view machinery orders are showing signs of pick-up.

(US$1 = 109.5600 yen)

(Reporting by Tetsushi Kajimoto and Daniel Leussink; additional reporting by Kantaro Komiya and Kentaro Sugiyama; Editing by Sam Holmes)