Japanese exports rose 27.7 per cent in June year-on-year, more than the previous forecast of 23.5 per cent, but the pace of increase slowed for the fourth consecutive month. This indicates that economic recovery may be losing steam as overseas demand decreases.

After peaking in February, with a rise of 45.3 per cent, export growth slowed. Exports to Asia, which account for more than half of Japan’s total exports, rose 31.7 per cent in June, year-on-year. Exports to China rose 22 per cent from 2009 however both values represent a slowdown for the fifth straight month.

Japan’s trade balance saw a surplus of JPY687 billion (*S$7.86 billion), an increase of 41.1 per cent, against the forecast of a JPY700 billion surplus and an increase of 43.7 per cent.

The export-reliant Japanese economy is facing heightened uncertainty due to the recent appreciation of the Japanese Yen and slowdown in important export markets such as the US and China. Appreciation of the Yen may reduce the competitiveness of Japanese exports.

Export demand from Europe and the US remain unstable due to the moderated economic recovery hence, shipment to other Asian nations will be important to sustain Japan’s export growth.

After the global recession, Japan’s economy expanded 5 per cent in the first quarter of 2010. Recovery was driven by exports to fast-growing emerging Asian nations.

*Exchange rate correct as at 26 July 2010