There was a 20.7% YoY import increase in the energy sector.
Despite an 8.1% increase in exports, the import surge resulted to US$5.23b (JPY 573.3b) in May from a trade surplus of US$5.65b in April.
According to UOB, the 14.0% YoY import increase mostly came from energy sector with a 20.7% rise YoY which is nearly ⅓ of headline growth. On a seasonally-adjusted basis, the trade deficit was US$ US$2.68b (JPY296.8bn).
“That said, the rest of the main import sub-segments all recorded increases and contributed to the 2/3 of the import surge in May, indicating robust Japanese domestic demand,” UOB noted.
The research firm noted that May export growth was also fairly broad based with the exception of ship exports which crashed 44.4% YoY. The export was mainly driven by sub-segments of chemicals (+12.5% YoY), machinery (+9.9% YoY), electrical machinery (+11.3% YoY), manufactured goods (10.7% YoY), and transport equipment (1.7%) YoY.
Also read: Japan's GDP grew 1.6% in 2017
UOB adds that key risks for Japan’s trade mainly comes from trade policy developments especially US-China trade tensions and US trade tensions with its major allies and the world.
Despite this, there was a strong demand for Japan exports in Asia especially in China, Taiwan and Thailand. Meanwhile, exports bound Italy, UK, South Korea, and Hong Kong decreased.
“Domestically, there are expectations for a rebound in private consumption given tight labor market conditions while the related investments due to lead-up to the 2020 Tokyo Olympics would also be constructive to domestic demand, and keep import demand supported,” UOB said.
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