MNI BRIEF: Japan May Exports Post First Drop In 8 Months

Japan’s exports fell 1.7% y/y in May, the first decline in eight months, following a 2.0% gain in April, dragged down by falling shipments of automobiles and iron, and steel products due to U.S. tariffs, Ministry of Finance data showed Wednesday.

Auto exports dropped 6.9% y/y in May after a 5.8% fall in April, following a front-loaded rise earlier this year. Iron and steel exports plunged 20.6%, worsening from April’s 12.3% drop.

Imports also declined 7.7% y/y in May, extending April’s 2.2% fall. The trade balance posted a JPY637.6 billion deficit, the second straight monthly shortfall after April’s JPY115.6 billion deficit.

Exports to China fell 8.8% y/y in May, the third consecutive decline, reflecting weak demand. Exports to the U.S. dropped 11.1%, with auto shipments to the U.S. plunging 24.7%, a sharp deterioration from April’s 4.8% drop, also reflecting prior front-loading.

The data is unlikely to prompt the Bank of Japan to change its view that exports remain broadly flat as a trend. 

BOJ officials are expected to closely monitor upcoming data to assess the trajectory, following the Board's decision Tuesday to hold the policy rate at 0.5%. (See MNI BOJ WATCH: Ueda Flags Gradual Hikes, Warns Of JGB Risks)