By Tetsushi Kajimoto and Daniel Leussink
TOKYO (Reuters) – Japan’s exports rose at the fastest pace in 41 years in May and a key gauge of capital spending grew, helping the world’s third largest economy offset sluggish domestic demand as COVID-19 vaccinations boost business activity in key markets.
The jump in exports largely reflected a rebound in shipments from last year’s pandemic-driven plunge, but it could still help the economy rebound from the first quarter’s doldrums amid a prolonged coronavirus state of emergency.
The solid data will likely bolster the view that the central bank will keep its ultra-easy policy unchanged at its June 17-18 policy meeting, although it may extend its pandemic-relief programmes to back a fragile economic recovery.
Ministry of Finance data on Wednesday showed exports grew 49.6% year-on-year in May, versus a 51.3% increase expected by economists in a Reuters poll, led by U.S.-bound car shipments.
The jump followed a 38% rise in April and marked the sharpest monthly increase since April 1980, when shipments surged 51.4%.
May’s rise in exports largely reflected the recoil effect of a 28.3% plunge in May of 2020.
Imports rose 27.9% year-on-year in May versus a median estimate for a 26.6% gain, resulting in a trade deficit of 187.1 billion yen ($1.70 billion), against the median estimate for a 91.2 billion yen shortfall.
Separate data by the Cabinet Office showed core machinery orders, which serve as leading indicator of capital expenditure in the coming six to nine months, rose 0.6% in April from the previous month, below an expected 2.7% gain.
Core orders, which exclude those for ships and electrical utilities, grew 6.5% year-on-year in April, versus a 8.0% gain expected by economists, the data showed.
The Bank of Japan is widely expected to keep its policy interest rate at minus 0.1% and the 10-year Japanese government bond yield target at around 0% at its policy meeting this week.
($1 = 110.0900 yen)
(Reporting by Tetsushi Kajimoto and Daniel Leussink; editing by Richard Pullin)
