TOKYO – Japanese exports fell in February from a year earlier, but confidence among Japanese manufacturers improved for the fourth consecutive month in a sign that the economy is slowly recovering from last year's recession.
Ministry of Finance data showed exports fell 2.9 percent in February from a year earlier, more than a 1.9 percent drop expected by economists in a Reuters poll, after a revised 6.3 percent rise in January.
Analysts say it will take time for the yen's slide to 3-1/2-year lows, which has been driven by Prime Minister Shinzo Abe's push for aggressive monetary easing and fiscal pump priming, to feed through to improved exports even though it immediately raises the price of imports.
But the policy mix aimed at ending nearly two decades of deflation and dubbed "Abenomics" is already boosting corporate morale.
A Reuters monthly poll, which is closely correlated with the Bank of Japan's quarterly tankan corporate survey, showed manufacturers' sentiment index rose by 2 points to minus 11 in March and was expected to swing to plus 4 in June.
"The trade data shows the pace of improvement in exports is slower than previously expected. The yen's weakness is likely to have an impact on export volumes gradually from the March and April data towards summer," said Yoshimasa Maruyama, chief economist at Itochu Economic Research Institute in Tokyo.
"The Reuters Tankan shows a pick-up in corporate sentiment for both manufacturers and non-manufacturers on the back of higher share prices," he said.
A negative reading in the poll means there are still more pessimists than optimists, but the March 4-18 survey of 400 firms of which 250 responded, shows the gap has been steadily narrowing since the end of 2012.
Economists say the currency's weakening tends to weigh on Japan's trade balance at first, as its effect of boosting the value of imports is immediate while it takes longer before the impact is reflected in prices and volumes of exports.
The drop in exports was also due in part on the timing of the Chinese New Year, which this year was in February and dented Japan's shipments to China from a year before when the holidays were observed in January.
Imports rose 11.9 percent in the year to February, a fourth straight increase but below expectations of a 15.1 percent rise, leaving the trade balance in a deficit for the eighth consecutive month.
The 777.5 billion yen ($8.14 billion) deficit was narrower than the 836 billion yen deficit expected by economists, but was still the largest on record for the month of February.
For decades, Japan had accumulated solid trade surpluses, but its trade balance swung to a deficit in 2011 and 2012 after the Fukushima crisis two years ago forced the nation to idle its nuclear power plants and import more oil and gas.
Economists expect Japan will return to a moderate economic recovery this year on improved global demand and on Abe's fiscal and monetary stimulus.
Expectations are high the Bank of Japan may boost its government bond purchases at its April 3-4 policy review, the first under new Governor Haruhiko Kuroda, who has vowed to do whatever it takes to hit the BOJ's new 2 percent inflation target.
(Additional reporting by Izumi Nakagawa and Kaori Kaneko; Editing by Tomasz Janowski and John Mair)