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Japan logs surprise trade deficit in May as energy costs expand

Exports to the European Union gained 19.8 percent to 692.37 billion yen and imports were up 12.5 percent to 732.91 billion yen, with Japan posting a trade deficit with the EU of 40.54 billion yen, the ministry’s data showed.The 14.9% growth in shipments from Japan in May was lower the average estimates of a 16.1% annual rise, however, it was the biggest increase since January 2015.”The main scenario is Japan’s exports will continue to recover”, said Shuji Tonouchi, senior market economist at Mitsubishi UFJ Morgan Stanley Securities.The growth in exports is partly thanks to a rebound after powerful twin quakes in southwestern Japan previous year disrupted production and supply chains.Japan’s trade deficit with China narrowed 22.4 percent to ¥311.8 billion as exports grew 23.9 percent.The Japanese yen traded lower after the release, with the USA dollar gaining 0.2% to ¥110.92.Imports are expected to rise 14.5 percent on year after gaining 15.1 percent in April.The latest report “confirms that the shipments will continue to drive Japan’s economy in coming months, feeding gradually to capital spending and household spending”, said Takeshi Minami, chief Japan economist at Norinchukin Research Institute.Exports to Asia, which includes China, rose 16.8 per cent in May from a year ago, the fastest increase in three months, due to increased shipments of electronics to Hong Kong and steel to Indonesia, the data showed.The Ministry of Finance reported a May merchandise trade deficit of ¥203.4 billion, down from a surplus of ¥481.7 billion in April.Policymakers and economists have become more optimistic about Japan’s prospects this year as an increase in factory output and a tightening labor market show the economy is poised to extend its recent growth.