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Exports rebound in boost for Abe’s policies

Bloomberg

Japan’s exports rose more than forecast in July, bouncing back from two straight declines to support an economy that contracted last quarter by the most since the period immediately following the Great East Japan Earthquake in March 2011.

Overseas shipments rose 3.9 percent from a year earlier, the Finance Ministry said in Tokyo on Wednesday. That’s higher than the median estimate for a 3.8 percent gain in a Bloomberg News survey of 28 economists. Imports, meanwhile, rose 2.3 percent, leaving a deficit of ¥964 billion.

The rebound in shipments may aid Prime Minister Shinzo Abe in his push to raise the sales tax for a second time following a boost to 8 percent in April. The economy is forecast to expand by an annualized 2.9 percent this quarter after contracting 6.8 percent in the April-June period, when consumers and businesses cut spending after the tax increase.

“Exports are increasing but still lack strong momentum,” said Takeshi Minami, chief economist at Norinchukin Research Institute Co. in Tokyo. “Imports are stronger than expected, largely due to a seasonal rise in the cost of fuel imports, and not due to domestic demand, which remains lackluster.”

Exports volumes were 5.6 percent higher in July compared with December 2012, when Abe took office, even as his reflationary policies have driven the currency down 17 percent against the dollar.

Imports tumbled an annualized 20.5 percent in the April to June period from the first quarter, while exports fell 1.8 percent, according to gross domestic product data released by the Cabinet Office last week.

The Bank of Japan may cut its growth forecast for this year for a fourth time as exports have failed to bolster an economy weakened by the levy increase. The central bank’s board may lower its median forecast for 1 percent growth this fiscal year, according to people familiar with the bank’s discussions.

Growth is likely to be 0.4 percent, according to the median estimate in a survey of 24 economists by Bloomberg News on Aug. 13-14.

The value of exports of motor vehicles rose 8.1 percent in July from a year earlier, with those to the EU jumping 74.3 percent and those to Asia climbing 17.8 percent. Shipments of metal-working machines to China were up 61.2 percent. The value of crude oil imports rose 6.9 percent and natural gas rose 7.4 percent.

The BOJ is set to review its economic and price outlook at an Oct. 31 meeting. The government will decide by the end of the year whether to increase the levy to 10 percent from October 2015.