Japan's April Exports Rise 14.8% YoY, Trade Surplus Exceeds Expectations

Japan's exports in April rose 14.8% year-on-year, significantly exceeding the 9.3% expected by Reuters surveys, and faster than the revised 11.5% in March. Despite ongoing conflicts in the Middle East disrupting energy supplies and global supply chains, exports have still managed to record growth for the eighth consecutive month, demonstrating that external demand remains an important pillar for the current Japanese economy.

The previously released data showed that Japan's real GDP grew by 0.5% quarter-on-quarter in the first quarter, which translates to a 2.1% annual growth rate, better than market expectations, and mainly driven by exports and consumption.

As a result, the trade balance in April showed a notably larger surplus than expected. Japan recorded a trade surplus of 301.9 billion yen, whereas the market had generally expected a deficit—Bloomberg surveys expected a deficit of 44.5 billion yen, and Reuters surveys expected a deficit of 29.7 billion yen.

The expansion of the surplus is not only due to strong exports, but also得益于 a significant reduction in energy imports. Overall imports in April rose 8.3% year-on-year, higher than market expectations, but imports of crude oil plummeted 64% on a year-on-year basis, marking the largest drop since 1980. Despite some increases in U.S. crude oil imports, it was not enough to offset the overall decline.

This places the Japanese economy in a short-term favorable but precarious position. According to Reuters, the closing of the Strait of Hormuz has driven up energy costs and disrupted the supply of oil and other inputs, but Japan's domestic production still relies on existing stocks and large strategic petroleum reserves to continue.

If the Middle East supply disruptions last longer than expected, the resilience currently shown by exports may face squeezes from both sides: on one hand, business production costs rise, and on the other hand, global demand may slow down due to high energy prices, with high-energy-consuming industries such as chemicals being affected the most.