Japanese export values posted only modest growth in February amid slowing global demand but picked up from January, when lunar new year holidays distorted trade flows with some parts of Asia, data released Thursday by the Ministry of Finance showed.

The pace of imports was also relatively slow on softer energy markets, which led to a narrower trade deficit in February after the balance hit a record shortfall in January.

Shipments to China, the key export market for Japanese goods, posted their third straight year-over-year decline as the world's second-largest economy has been hit by the resurgence of the pandemic since Beijing lifted its strict zero-Covid public health rules in early December.

The Econoday Consensus Divergence Index stood at plus 18, above zero, which indicates the Japanese economy is performing better than expected after outperforming earlier. Excluding the impact of inflation, the index was at plus 34.

Export values rose 6.5 percent on the year in February for the 24th straight rise, with the pace of increase picking up from a 3.5 percent gain in January but slower than 11.5 percent in December and 20.0 percent in November and a 25.3 percent surge to a record high ¥9.0 trillion in October. It was weaker than the median forecast of a 7.7 percent rise (forecasts ranged from 5.0 percent to 12.5 percent increases). The slow January figure was due to rush shipments of goods ahead of the Jan. 22 lunar new year (compared to Feb. 1 in 2022) and suspended cargo handling and customs clearance in China, Taiwan and Hong Kong during their lunar new year holidays.

Amid slowing global economic growth, export volumes fell 7.9 percent on the year for the fifth straight drop after falling 11.5 percent in January, 7.1 percent in December, 3.6 percent in November, edging down 0.3 percent in October and rising 7.3 percent in September.

The increase in February export values was led by the recent pickup in automobile shipments, thanks to easing global supply constraints, and solid demand for mineral fuels, all as seen in the previous month. Exports of drugs also rose but those of auto parts and plastics continued to dip.

Import values rose 8.3 percent on the year in February for the 25th straight increase, coming in lower than the median forecast of a 11.7 percent rise. It followed increases of 17.8 percent in January, 20.8 percent in December, 30.3 percent in November and a 53.6 percent jump to record high ¥11.17 trillion in October. The increase was led by higher prices for coal, crude oil and natural gas, compared to year-earlier levels, as seen in recent months.

Import volumes fell 7.8 percent on year in February for the fourth straight decrease after dipping 2.4 percent in January, 6.4 percent in December and 4.6 percent in November and rebounding 5.6 percent in October.

The trade balance came to a deficit of ¥897.7 billion in February. It marked the 19th straight month of a shortfall, narrowing from a record high deficit of a revised ¥3,496.6 billion in January but widening for a deficit of ¥711.5 billion in February 2022. The gap was smaller than the consensus forecast of a ¥1,074.0 billion (Y1.07 trillion) deficit.

Japanese export values are expected to mark only modest growth in February, up 7.7 percent on year, amid slowing global demand but up from a 3.5% rise in January, when lunar new year holidays distorted trade flows with some parts of Asia. The pace of imports is also seen relatively slow on softer energy markets, up 11.7 percent, after rising 17.8 percent. The trade deficit is estimated at ¥1,074.0 billion (¥1.07 trillion), narrowing from a record high deficit of a revised ¥3,498.6 billion (Y3.5 trillion) in January but widening form a ¥711.5 billion deficit in February 2022.

Merchandise Trade balance measures the difference between imports and exports of both tangible goods and services. The level of the international trade balance, as well as changes in exports and imports, indicate trends in foreign trade.

Japan's merchandise trade balance measures visible trade and excludes services. Specifically it is the difference between imports of goods and exports of goods. A positive value indicates a trade surplus (exports exceed imports) while a negative value indicates a trade deficit (imports exceed exports). Movements in the trade balance reflect altered demand for Japanese exports which subsequently impact the yen's value and directly affect GDP growth because of the economy's dependence on trade.

The report gives insight into changing trends regarding Japanese trade. Such developments are especially important for Japan, which is an export-oriented economy that has historically experienced large trade surpluses and any change can have a dramatic effect on the domestic economy. Typically the headline number is the change from the previous year in yen along with the percentage change in exports and in imports from the previous year.