Japan sees trade surplus in June as imports drop 19 percent

Japan posted a merchandise trade surplus 692.835 billion yen in June, the Ministry of Finance said on Monday. “The US economy is a bright spot and should help Japan’s exports recover”.

A recovery in Japan’s exports is expected to ease concerns for Bank of Japan policymakers as they struggle to revive growth and add stimulus to their structural reform plans that disappointed to deliver the expected outcome. “The (Japanese) government’s stimulus plan is created to help domestic demand, but without broader reforms they are just buying time”. China-bound shipments dropped 10.0 per cent in June, marking a fourth straight monthly decline, while they were down 6.5 per cent to the U.S., led by a fall in auto and steel exports.

Still, overall volumes of exports and imports were better than expected.

Exports to the USA, the largest destination for Japanese shipments, fell 6.5% in June, down for a fourth straight month, according to the ministry. Shipments to China and the USA also fell over the six-month period. Although ahead of forecasts for a larger drop of 19.7%, the decline was steeper than the 13.8% drop registered in the year to May.

Shipments of vehicles, chemicals and machinery fell year-on-year.

Japan’s exports to the 28-member European Union rose 4.0 percent to 4.04 trillion yen in the period, while imports from the region shed 0.2 percent to 4.04 trillion yen.

Japanese policymakers are anxious about further gains that would severely erode exporters’ earnings and increase deflationary pressure by lowering import prices.

The government kept its assessment of the economy unchanged in its monthly economic report released earlier on Monday but said business sentiment had worsened.

The government is crafting a 20 trillion yen ($187.93 billion) spending package to stimulate the economy, three government sources told Reuters last week.

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Meanwhile, the central bank is expected to ease interest rate policy at its monetary policy meeting scheduled to be held on July 29, according to a poll of economists by Reuters.