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Japan export engine fires up in June

Michael H | Photodisc | Getty Images

Japan's exports rebounded in June, fueled by strengthening overseas demand, but imports remained subdued due to the effect of lower commodity prices, data showed on Thursday.

Exports accelerated 9.5 percent on year in June, the fastest pace in five months and following a 2.4 percent increase in the May.The reading, however, came in a tad below a 10 percent increase expected by economists in a Reuters poll.

Imports, meanwhile, slipped 2.9 percent last month, better than expectations for a 4.0 percent annual decrease and following a 8.7 percent fall in May.

The trade balance came to a deficit of 69.0 billion yen ($556.54 million), missing expectations for a 5.4 billion yen surplus.

Economists pinned the export recovery on a resurgence in demand from the U.S. Exports to the world's largest economy rose almost 18 percent on year in June.

"Japan's export environment depends on U.S. economy growth. U.S. growth was weak in the first quarter, but it is now rebounding," said Takuji Aida, the chief economist for Japan at Société Générale.

"As such, we expect the export recovery to continue into the second half of the year. This will support Japan's GDP growth and operating profits of the manufacturing sector," he said.

While imports remained weak reflecting the slump in oil prices, Aida says domestic demand in the economy is beginning to recover.

"All in all, the recovery in Japan's trade balance is very gradual," he said.