By Daniel Leussink and Kantaro Komiya

TOKYO (Reuters) – Japan’s exports extended double-digit gains in August, led by strong shipments of chip manufacturing equipment, though the pace of growth weakened mainly due to the deepening impact of a COVID-19 resurgence across Asia.

These trade figures are not likely to alleviate concerns about Japan’s future economic prospects. Japan was severely affected by the collapse of global trade during the first quarter.

According to Thursday’s Ministry of Finance, August saw an increase of 26.2% in exports compared to the prior year. It marks the sixth consecutive month of double digit growth. The strong demand for chips-making equipment offsets slower U.S. and E.U. shipments of automobiles.

According to Reuters, the growth was lower than expected. It also fell below the 38.0% predicted by economists and the 37.0% in the month before.

Takeshi Minami of Norinchukin Research Institute, chief economist, said, “The semiconductor issue had quite an impact which weighed on automobile exports a lot.”

I believe it’s going to have an effect on exports for at least the end of the year, as long as there is still a shortage in parts in Southeast Asia.

The fragile recovery is under threat from the resurgence in the pandemic in Asia. Policymakers must ensure that the fragile recovery does not unravel.

While vaccination rates are improving and daily COVID-19 infections appear to have peaked, analysts expect Japan to see annualised 1.2% growth https://www.reuters.com/world/asia-pacific/japans-q3-growth-forecast-more-than-halved-covid-19-impact-2021-09-14 in the current quarter, much slower than projected last month, a Reuters poll on Tuesday showed.

The data revealed that shipments to China in August rose 12.6% annually, led by semiconductor parts and chemicals.

The United States is the top-ranked economy in the world. Exports rose 22.8% due to strong demand for power-generating equipment.

The overall growth in exports to Asia was 26.1%. This is the slowest rate in five months. However, imports to Europe grew 29.9% in August.

The August imports increased 44.7% compared to the previous year, which is a 4.0% rise versus the median forecast for a 40% increase. This resulted in a trade deficit totalling 635.4 billion Japanese yen ($5.81 billion), versus the median projection for a 47.7 million yen shortfall.

According to Reuters Tankan’s Wednesday poll, confidence in Japanese manufactures fell to a five month low following the new wave of COVID-19-related factory halts throughout Asia.

($1 = 109.4200 yen)