World Economy

More signs of Japan rebound: Exports soar

Honda Motor vehicles bound for shipment sit parked at a port in Yokohama, Kanagawa Prefecture, Japan.
Kiyoshi Ota | Bloomberg| Getty Images

Japan's exports rose a stronger-than-expected 18.6 percent in October from a year before, notching up the fastest gain in over three years thanks to the weak yen and a pick-up in overseas demand, data on Wednesday showed.

The rise compared with an 11.5 percent increase in September and market expectations in a Reuters poll for a 16.5 percent gain.

(Read more: Is there no stopping Japan's Nikkei)

The data is the latest sign of a recovery in the world's third biggest economy, with economists saying that strength in exports to the U.S. and China, Japan's biggest trading partners, was particularly positive.

Exports to China soared an annual 21.3 percent in October, while exports to the U.S. were up 26.4 percent.

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"The data was stronger than expected, but only modestly so when you look at the month-on-month numbers," said Glenn Levine, senior economist at Moody's Analytics, referring to the 1.5 percent rise in October exports compared with the previous month.

"Nevertheless, this is a pretty good set of numbers, with exports rising to all of Japan's main export destinations because of the weak yen and the uplift in the global economy," he added. "Motor vehicle sales to the U.S. are soaring right now."

Japan's Toyota Motor earlier this month lifted its North America sales forecast to 2.63 million vehicles for the year ending in March 2014, from 2.61 million.

(Read more: Toyota says October China sales up)

The trade data also showed Japan's imports rose 26.1 percent in October, compared with market expectations for a 19 percent rise. The trade balance stood at a deficit of 1.09 trillion yen ($10.9 billion) compared with the 813.5 billion yen deficit forecast by analysts.

Weakness in the yen, which is down more than 16 percent against the dollar so far this year, has helped give Japanese exports an edge in overseas markets. It's also pushed up the cost of imports and especially energy imports, on which Japan relies heavily.

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Junko Nishioka, chief Japan economist at the Royal Bank of Scotland in Tokyo, said the import data reflected a pick-up in consumption.

Boosting domestic demand and lifting inflation have been one of the key aims behind the economic policies of Japan's Prime Minister Shinzo Abe in order to revive Japan's economic fortunes.

Data released last week showed Japan's economy grew 0.5 percent in the third quarter from the previous one, slowing from a 0.9 percent expansion in the April-June period amid weakness in exports and as consumer spending eased.

(Read more: Japan's economic growth slows in Q3)

"At the moment, the Japanese economy is recovering and momentum is picking up thanks to the pick-up in domestic demand," Nishioka said.

"Compared with a few months ago the upward pressure on energy imports is declining and we are seeing a pick-up in domestic demand, with demand for electronics driving imports," she added.

—By CNBC.Com's Dhara Ranasinghe; Follow her on Twitter @DharaCNBC