(Bloomberg) -- Supply Lines is a daily newsletter that tracks global trade. Sign up here.

Japan’s exports grew for a fourth consecutive month as the weak yen provided a tailwind and demand in China picked up, giving the economy a needed boost as domestic consumption sags.

Exports gained 7.3% in March from a year earlier, with growth slightly decelerating from February’s 7.8% gain, the finance ministry reported Wednesday. Economists had forecast a 7% increase. Imports fell 4.9%, compared with the consensus estimate of a 5.1% decline. 

Wednesday’s data showed that the economy continues to benefit from the effects of a sliding yen that is giving a flattering gloss to the underlying export trend. The yen averaged 149.45 to the dollar in the latest month, 10.7% weaker than 134.97 in the previous year, the ministry said. That helped inflate the value of some shipments in yen terms. By volume, exports declined by 2.1%.

“I feel that the March exports growth was largely due to the currency factor, and exports are not that strong,” said Yayoi Sakanaka, senior economist at Mizuho Research & Technologies. “Semiconductors are picking up, but not yet in terms of volume.”

The currency impact may continue to sustain growth in exports in coming months, as the yen has extended losses. Japan’s currency continues to trade around fresh 34-year lows, prompting objections from authorities.

Read more: Japan’s Tepid Warning on Yen Fuels Renewed Weakness Ahead of IMF

Among industries leading the gains in March were the automakers and semiconductor and electronic parts sectors, which saw increases of 7.1% and 11.3%, respectively.

By region, China saw a 12.6% increase, accelerating from 2.5% in the previous month, as businesses ramped up operations following the lunar new year holidays, helping to power 5.3% economic growth in the January-March quarter. But shipments to the US and Europe rose at a slower pace of 8.5% and 3%, pointing to some patchiness in the overall export trend.

What Bloomberg Economics Says...

“A slightly weaker gain in Japan’s outbound shipments in March doesn’t derail a solid trend that is likely to bolster GDP in the first quarter via stronger net exports and, indirectly, capital investment.”

— Taro Kimura, economist

For the full report, click here

Japan’s growth in shipments comes against the backdrop of a somewhat shaky environment for global commerce overall. Worldwide trade is advancing little by little, with the Goods Trade Barometer managed by the World Trade Organization reaching 100.6 last month. That’s slightly above the trend baseline, indicating weak upward momentum, but various risks to the outlook persist. 

“Merchandise trade should continue to recover gradually in the early months of 2024, but any gains could be easily derailed by regional conflicts and geopolitical tensions,” the global organization said last month.

Japanese exporters are monitoring demand prospects in their key overseas markets. Federal Reserve Chair Jerome Powell signaled Tuesday that policymakers will wait longer than previously anticipated to cut interest rates following a series of surprisingly high inflation readings.

The continued growth in shipments may help Japan record a modest economic expansion in the first quarter of 2024, offsetting the impact from stagnant domestic demand. Japan narrowly avoided a recession in the previous period, with anemic private consumption exerting a drag.

The world’s fourth-largest economy is projected to record a small expansion again in the January-March quarter, according to a Bloomberg survey. 

(Adds economist’s comments)

©2024 Bloomberg L.P.