Japan exports strengthen in June but China clouds outlook

Shipments to Asia rose 10.1 percent year-on-year in June, versus a 3.3 percent annual increase in the previous month.
Shipments to Asia rose 10.1 percent year-on-year in June, versus a 3.3 percent annual increase in the previous month.PHOTO: BLOOMBERG

TOKYO (REUTERS) - Japan's exports rose at the fastest pace in five months in June, due to a pick-up in sales of cars and electronics but there are lingering concerns that China's economic slowdown will hurt Japanese shipments in future.

Exports rose an annual 9.5 per cent in June, less than the median estimate for a 10.0 per cent by economists in a Reuters poll. It followed a 2.4 per cent year-on-year rise in May.

Policymakers are counting on exports to supplement Japan's domestic-demand driven economy, but China's slowing economy is becoming more of a risk to the outlook and could curb Japan's growth by slowing its exports.

"I expect gradual recover in exports but there are downside risks, because exports to China may not do that well," said Shuji Tonouchi, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities.

"The pace of Japan's economic growth could depend more on domestic capital expenditure, but growth may not be strong enough to meet the Bank of Japan's expectations," he said.

Exports destined for China, Japan's largest trading partner, rose 5.9 percent in June from a year ago, compared with May's 1.1 percent annual increase as shipments of electronics and plastics rose.

Shipments to Asia rose 10.1 percent year-on-year in June, versus a 3.3 percent annual increase in the previous month.

Japan's exports to the United States rose an annual 17.6 percent in June, far above the 7.4 percent seen in May, thanks to higher shipments of cars and pharmaceuticals.

Total imports fell 2.9 percent in June from a year earlier, compared with the poll's median estimate for a 4.0 percent decrease.

The trade balance was a deficit of 69.0 billion yen ($556.54 million), versus the median estimate for a 5.4 billion yen surplus.

Japan's economic growth is forecast to slow sharply in April-June as companies produced fewer goods, to focus on lowering inventories, and as exports slowed from the previous three months.

Economists expect growth to accelerate in the current quarter due to gains in consumer spending, but close trade ties mean Japan could be hit by China's slowing growth.

($1 = 123.9800 yen) (Editing by Richard Borsuk) Reuters 2015-07-23T00:55:01.000Z(VersionCreatedDate) 2015-07-23T005501Z-175185066-L3N1011OB-RTRMADT-0-JAPAN-ECONOMY-TRADE-UPDATE-1.txt nnnn