After entering a recession last year the Japanese economy is considered to be back on track by having expanded for two straight quarters. As the world’s third largest economy is heavily dependent on exports, the better-than-expected figure in April supported growth indicators, although these weakened compared to March.
According to Japan’s Ministry of Finance, exports increased 8.0 percent year-on-year in April, above an expectation of 6.4 percent, slowing from a 8.5 percent gain in March. Imports fell more than expectations, down annually 4.2 percent, compared with a predicted 1.5 percent fall, taking the trade deficit in April up to $439 million. In March the trade balance was in surplus for the first time since June 2012.
Exports to the US rose 21.4 percent in April, keeping the pace of gains from the previous month. However, shipments to China Japan’s top trading partner rose 2.4 percent, slowing from a 3.9 percent gain in March. Additionally, exports to Asia which consist of half of Japan’s shipments, grew 6.0 percent.
According to analysts the slowdown in exports are linked to a weakness in demand in other Asian countries, which has increased concerns that the slowdown could hold back Japan’s recovery.
Meanwhile, the International Monetary Fund (IMF) warned the Bank of Japan (BOJ) that the central bank’s forecasts of reaching 2 percent inflation target is “overly optimistic.” The Fund also urged the country to advance its fiscal reforms, instead of relying heavily on yen weakness. “Without bolder structural reforms and credible fiscal consolidation, domestic demand could remain sluggish, and any further monetary easing could lead to over-reliance on depreciation of the yen,” the IMF said.
In April 2013 the BOJ launched a monumental monetary stimulus aimed at reviving the country’s stalling economy and create inflation. Additionally, the bank injected a further stimulus of $700 billion in October 2014. Last week, the Japanese economy expanded at its fastest pace in a year by growing at an annualised 2.4 percent from the previous quarter.