Cheap yen and robust demand in US, Asian markets, Japan’s exports climb 13.5% in May.

With a weak yen and robust demand in the United States and Asia, Japan’s exports jumped 13.5% in May, quicker than predicted increase.

Down almost 12% from 1.38 trillion yen a year earlier, Finance Ministry data issued Wednesday indicated the trade deficit amounted to 1.22 trillion yen ($7.7 billion). Year-on-year imports increased by 9.5%, to around 9.5 trillion yen ($60 billion).

Rising at the fastest since November 2022, exports came at 8.3 trillion yen ($53 billion). Lead by double-digit increase in shipments of autos, electronics and machinery, shipments to the United States were up about 24% while those to the rest of Asia grew 13%.

Trade with Europe basically dropped out.

As the Japanese yen loses value versus the U.S. dollar and other main currencies, the value of Japan’s imports usually increases. Comparatively to 140-yen levels a year ago, the dollar is trading at about 158 yen.

Japan is a resource-poor country that imports almost all of its oil; so, increased imports of gas and other fuels play a major role in explaining the deficit in May, the second month in a run. May also brought gains in fruit imports.

Rising prices generally, which inflated their value relative to a year earlier, was a major cause behind the gains in both exports and imports, though, according to Marcel Thieliant of Capital Economics in a report.

The subdued effect of trade on the economy—which shrank at a 1.8% rate in the first quarter of the year—showcases this.

Actually, it stated, “most of the increase in trade values over the past year reflects rising prices due to the sharp weakening of the yen rather than any marked improvement in volumes.”

Still, commerce with China, Japan’s second-largest single export market after the United States, has been revitalizing as its economy gradually heals from the shocks of a crash in its property sector and the aftereffect of the COVID-19 epidemic.

Vehicles as well as industrial and manufacturing components showed notable increase in shipments.

Furthermore, the U.S. economy has been strong even as the Federal Reserve maintains record-high interest rates in an attempt to lower quite high inflation.

Some anxiety among Japanese policy officials stems from the weakness in the yen. Released Wednesday, the Bank of Japan’s meeting notes revealed its decision-makers discussing the effect of the weak yen on inflation, which has stayed rather low compared with other big countries.

Deflation, where prices continue to drop, is the greater concern for Japan. That points to a declining economy, and the central bank has been working to start a slow price hike.

“But trade data today also highlighted that it is having a positive impact on exports,,” IG market analyst Yeap Jun Rong remarked in a commentary.