TOKYO (REUTERS) – Japan’s exports rose at the fastest pace in 41 years in May and a key gauge of capital spending grew, helping the world’s third largest economy offset sluggish domestic demand as Covid-19 vaccinations boost business activity in key markets.

The jump in exports largely reflected a rebound in shipments from last year’s pandemic-driven plunge, but it could still help the economy rebound from the first quarter’s doldrums amid a prolonged coronavirus state of emergency.

The solid data will likely bolster the view that the central bank will keep its ultra-easy policy unchanged at its June 17-18 policy meeting, although it may extend its pandemic-relief programmes to back a fragile economic recovery.

Ministry of Finance data on Wednesday (June 16) showed exports grew 49.6 per cent year on year in May, versus a 51.3 per cent increase expected by economists in a Reuters poll, led by US-bound car shipments.

The jump followed a 38 per cent rise in April and marked the sharpest monthly increase since April 1980, when shipments surged 51.4 per cent.

May’s rise in exports largely reflected the recoil effect of a 28.3 per cent plunge in May of 2020.

Imports rose 27.9 per cent year-on-year in May versus a median estimate for a 26.6 per cent gain, resulting in a trade deficit of 187.1 billion yen (S$2.26 billion), against the median estimate for a 91.2 billion yen shortfall.

Separate data by the Cabinet Office showed core machinery orders, which serve as leading indicator of capital expenditure in the coming six to nine months, rose 0.6 per cent in April from the previous month, below an expected 2.7 per cent gain.

Core orders, which exclude those for ships and electrical utilities, grew 6.5 per cent year-on-year in April, versus a 8.0 per cent gain expected by economists, the data showed.

The Bank of Japan is widely expected to keep its policy interest rate at minus 0.1 per cent and the 10-year Japanese government bond yield target at around 0 per cent at its policy meeting this week.