TOKYO • Japan's exports accelerated last month, led by a jump in Chinese demand, and manufacturers' sentiment turned positive for the first time since 2019, signalling a gradual recovery from last year's deep coronavirus slump, reports showed yesterday.
Core machinery orders - a volatile but leading indicator of capital spending - unexpectedly rose last December, an encouraging sign for a private sector-led recovery, even as renewed curbs to contain the pandemic weighed on business activity.
Despite the upbeat indicators, however, analysts warn that recovery momentum in the world's third-largest economy could stall as policymakers struggle to balance the need to contain the virus against the need to revive growth and fix Japan's dire finances.
"The economy's recovery is pausing in the current quarter, although development of coronavirus vaccines may reduce risks ahead," said Mitsubishi UFJ Morgan Stanley Securities senior economist Hiroshi Miyazaki.
"Uncertainty remains high for both exports and machinery orders, as delays in vaccinations or resumption of activity among the public on expectations for vaccines could heighten risks of another wave of virus resurgence."
The indicators followed fourth-quarter gross domestic product data on Monday that showed that Japan's economy grew more than expected, as a fast-recovering Chinese economy helped boost exports and capital expenditure.
Ministry of Finance data showed yesterday that exports rose 6.4 per cent last month from a year earlier, roughly in line with a 6.6 per cent increase seen by economists in a Reuters poll and following a 2 per cent gain last December.
By region, exports to China - Japan's largest trading partner - jumped 37.5 per cent in the year to last month, the biggest gain since April 2010, led by chipmaking equipment, plastics and non-ferrous metal.
The big gain is partly due to the base effect of the large decline seen a year before when the Lunar New Year holiday, which weighs on trade activity, was in January that year, said a ministry official. United States-bound shipments fell 4.8 per cent, dragged down by airplanes, motors and car parts.
Reflecting soft domestic demand, imports fell 9.5 per cent in the year to last month, versus the median estimate for a 6 per cent drop, swinging the trade balance to a deficit of 323.9 billion yen (S$4.06 billion).
Analysts expect Japan's economy to contract in the current quarter, as service consumption has been hit hard by renewed state of emergency curbs issued last month and set to last until next month.
Separate data by Japan's Cabinet Office showed core machinery orders - considered an indicator of capital spending for the next six to nine months - rose 5.2 per cent last December from the previous month, versus a 6.2 per cent drop expected. The government described machinery orders as picking up, marking an upgrade for the third straight month from its previous assessment that they were showing signs of a pickup.
Raising worries about the outlook, however, manufacturers surveyed by the Cabinet Office expected core orders to fall 8.5 per cent in January-March, after advancing 16.8 per cent in the previous quarter. Japanese manufacturers' morale turned positive this month, the first time since July 2019, a Reuters Tankan survey showed.
REUTERS
