Japan’s exports extended declines in October but at the slowest pace in almost two years, helped by improvement in Chinese- and US-demand for cars and other items as the world’s third-largest economy emerged from its worst postwar slump.

The trade data is likely to encourage policymakers who are counting on external demand to shift Japan’s recovery away from government stimulus back to private sector activity, although a coronavirus resurgence has clouded the outlook.

Ministry of Finance (MOF) data out Wednesday showed exports fell 0.2% in October from a year earlier, compared with economists’ median estimate of a 4.5% decrease in a Reuters poll.

It was the smallest decline in Japan’s 23 straight months of export contraction and follows a 4.9% fall in the previous month. Capital Economics Japan Economist Tom Learmouth said the boost from improving exports to the broader recovery was likely to be limited. “Although export volumes returned to pre-virus levels in October, import volumes bounced back more strongly,” Learmouth said.

“That supports our view that the boost to growth from net trade will now fade.” By destination, shipments to the United States rose 2.5%, a second straight month of increase and the biggest since July 2019 led by demand for automobiles and car parts.

Exports to China, Japan’s largest trading partner, increased 10.2%, driven by chip-making equipment, cars and plastic, while those to Asia as a whole rose 4.4%, the first increase in eight months. Shipments to the European Union fell 2.6% in October.

Imports fell 13.3% in the year to October, bigger than the median estimate for a 9.0% decrease but slower than the 17.2% fall in September.

That brought a trade surplus of 873 billion yen ($8.38 billion), versus the median estimate for a 250.0 billion yen surplus.

Japan’s economy grew at the fastest pace on record in the third quarter, rebounding sharply from its biggest postwar slump, as improved exports and consumption helped the country emerge from the damage caused by the coronavirus pandemic. ($1 = 104.1300 yen) 

Reuters