Japan's exports rose for the first time in three months in July, a sign that overseas demand is improving, but optimism was tempered by the month's trade deficit which widened unexpectedly.
The country's exports rose 3.9 percent in July from the year ago period, data showed on Wednesday, a tad higher than a Reuters forecast for a gain of 3.8 percent and after falling 2 percent in June.
Imports rose an annual 2.3 percent versus expectations for a 1.7 percent decline and following an 8.4 percent in increase in June.
This brings trade deficit to 964 billion yen for July compared with June's deficit of 822.2 billion yen. Expectations were for a trade gap of 702.5 billion yen.
Analysts say the improvement in exports was thanks to a recovery in exports to the U.S., Europe and Asia, which rose 2.1 percent, 10.2 percent and 3.4 percent, respectively, on an annual basis.
"Major contributors to the increase were motor vehicles, metal working machinery, and scientific optical instruments, which were partially offset by declines for visual apparatus, computer parts and other items,"Harumi Taguchi, economist at IHS Global Insight, wrote in a note.
Izumi Devalier, Japan economist at HSBC, said the rise in imports was a "big surprise" and signals recovery in domestic demand.