Japan’s trade balance swung back into deficit in May, driven by a surge in energy exports.

However, looking into the detail of the report, it’s clear that demand from both within Japan and abroad continues to improve, adding to evidence that the global economy continues to strengthen.

According to Japan’s Ministry of Finance (MoF), a deficit of 203.4 billion yen was recorded, the first seen since January this year. That was in stark contrast to the 481.7 billion yen surplus recorded in April, and missed expectations for a narrowing in the surplus to 76 billion yen.

However, the surprise deficit was driven by unexpectedly strong growth in Japanese imports, suggesting that demand in the world’s third-largest economy remains firm.

The MoF said the value of imports grew by 17.8% from a year earlier, the fastest year-on-year increase since March 2014. The figure topped expectations for an increase of 14.8%, and was higher than the 15.1% growth reported in the year to April.

According to Bloomberg, price and currency changes raised the value of Japan’s energy imports over the year, explaining the sharp acceleration in total imports growth reported in May.

“The import volume of liquid natural gas rose 13% from a year ago, while the value jumped almost 69%,” said Bloomberg. “Coal and oil were similarly affected.”

Reflecting not only a slightly weaker yen but also robust external demand, the MoF also reported a strong lift in exports over the same period.

They grew by 14.9% from May 2016, a sharp increase on the 7.5% increase reported in April. Despite the strong acceleration, it actually undershot expectations for even faster growth of 16.1%.

However, it still marked the fastest year-on-year growth since January 2015.

Helping to further cement the view that global economic conditions are strengthening, the MoF said the value of exports to China, the US and European Union all grew rapidly from a year earlier.

Those to China — Japan’s largest trading partner — grew by 23.9%, outpacing increases of 19.8% and 11.6% from the EU and US.

“Exports are solid,” Takeshi Minami, chief Japan economist at Norinchukin Research Institute, told Bloomberg. “Today’s report confirms that the shipments will continue to drive Japan’s economy in coming months, feeding gradually to capital spending and household spending.”

Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance, agreed with that sentiment, telling Bloomberg that steady growth in exports due to strengthening external demand “is a leading factor in the Japanese economy”.

“There’s no weak spot among major regions globally and all are heading toward recovery, which is helping Japan’s exports,” he said.

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