Tetsushi Kajmoto, Daniel Leussink

TOKYO (Reuters – Japan’s exports saw a third month of double-digit growth in April due to U.S. Demand. But, high global commodity costs inflated Japan to a new record and fueled concerns over rising living expenses.

However, to help boost the chances of a recovery driven by private demand, a gauge for capital expenditure posted its first month-end gain in three years.

On Thursday, mixed data followed the fall of the yen to 131/$ earlier in May. This fueled fears about worsening trade terms and increased financial burdens on the resource-poor Japanese economy.

The weakening yen was once a blessing for the export-led economy. However, shipments are shrinking and this is due to Japanese manufacturing shifting to offshore production.

Japan’s April exports increased 12.5% compared to a year ago, Ministry of Finance data revealed. This was led by U.S.-bound shipments of automobiles and below the 13.8% expected increase by economists according to Reuters. This follows a March increase of 14.7%.

The median estimate of a 35.0% rise in imports was wrong. This is because a weaker Japanese yen helped to boost already rising global commodity prices.

The result was a trade deficit totalling 839.2 Billion Yen ($6.54B), less than the median estimate of a 1.150 TILLION yen gap, and a 9th consecutive month in red.

Analysts warned about the dangers of cost-push inflation to the fragile economy. These are external factors and not domestic demand.

Separate data indicated that Japan’s core machinery orders rose by 7.1% over March, versus a 3.7% rise expected by economists according to Reuters.

Volatility data, which was regarded as the most reliable indicator of capital expenditure for the next six to nine month, offered a glimpse of hope for domestic demand-driven recovery.

Japan’s economy contracted in March-January for the first two quarters. This was due to COVID-19 curbs that hit the services sector, and rising commodity prices creating new pressures.

($1 = 128.3600 yen)