Asian exporters show recovery still has legs amid virus fears

(Bloomberg) – Japan and South Korea continued to post strong export gains, a sign that the impact of virus variants has yet to have a major impact on global demand, so even as the recovery in world trade is approaching its peak.

Exports from Japan, the world’s third-largest economy, jumped 49% in June from a dismal level a year earlier, while the value of Korean shipments abroad in the first three weeks of July increased by a third.

While both figures point to a spike in gains from last year’s very weak performance amid the pandemic crisis, exports continued to grow month over month, indicating that the recovery of the economy. world trade still has legs. Japan’s shipments are up nearly 10% from two years earlier, the biggest gain from 2019 this year.

Nonetheless, economists warned that monthly export gains were also on the verge of leveling off and would offer less aid to global growth in the second half of the year, with the impact of viral variants still difficult to fully assess.

“The recovery in the global economy is starting to look more like a swoosh than a V,” said Cho Chuel, an analyst at the Korea Institute of Industrial and Trade Economics. “Variants of the virus will weigh on global trade and temper the views of optimists who had raised their growth forecasts until recently. “

Japanese and Korean data showed that exports to China and shipments of cars and semiconductors continue to accumulate gains. China has already released figures showing that its exports rose 32% in June, a slight acceleration from the previous month.

Continued growth in China, the region’s economic mother ship, will be necessary to continue fueling the recovery. Second-quarter growth data suggests Beijing can meet its growth target of over 6% for the year and continue to drive global demand for raw materials and industrial goods.

Read more: China’s more balanced recovery supports global rebound

“Markets have started to shake over concerns about new epidemics, but economic data does not show much of the impact of people who are abstaining from activity,” said economist Hiroaki Muto of Sumitomo Life Insurance Co. the recovery is holding up.

Korea expects record exports this year to bring economic growth to at least 4%, a bullish outlook that has supported the Bank of Korea’s plans to move forward with policy normalization this year. and to drive rate hikes in Asia. But that prospect becomes less certain as the spread of the more contagious variant thwarts plans to lift restrictions in many economies, including Korea itself.

In Japan, even with vaccinations ramping up, a slight increase in infections has put Tokyo in its fourth state of emergency and excluded fans from the Olympics. Games without spectators calmed the mood of an event that was previously hoped to serve as a psychological turning point for the world in the fight against Covid-19.

Read more: Olympics without fans leaves hotels facing 1 million cancellations

“Asia as a whole is disrupted by the new variant, and it has been difficult for the region to return to where it was before the pandemic,” said economist Harumi Taguchi at IHS Markit. “Both in Japan and abroad, the rate of recovery depends on the rate of vaccination. “

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