Strong Japan exports suggest end to econ lull near

TOKYO (Reuters) - Japan's annual export growth picked up more strongly than expected in December as shipments to China jumped to a record high and auto demand in the United States recovered, reinforcing views that the economy will soon emerge from a lull.

The data backs up the Bank of Japan's forecast that the export-reliant economy will resume a recovery early this year following a short pause brought on by slowing overseas growth and the expiry of stimulus measures.

The central bank's somewhat upbeat take on the economy on Tuesday, following its decision to keep rates on hold, further dampened any expectations of an imminent monetary easing.

But lackluster domestic demand is likely to cause the central bank to stick to its ultra-loose policy for years to come, economists say.

"Exports in December turned out to be pretty good thanks to solid demand from China as well as brisk U.S. consumption during the Christmas holidays," said Takeshi Minami, chief economist at Norinchukin Research Institute in Tokyo.

"Exports will firm up in January-March but downside risks remain, such as inflation in emerging economies and persistent yen strength.

SHIPMENTS TO CHINA

Exports rose 13 percent in December from a year earlier, more than economists' median forecast for a 9.2 percent annual rise. Imports increased 10.6 percent from a year earlier against an expected annual rise of 12.0 percent, Ministry of Finance data showed on Thursday. JPEXPY=ECI JPIMPY=ECI

Brisk shipments to the United States aided overall export growth as auto demand recovered, supporting budding optimism about the U.S. economic recovery, while strong demand from China also provided a boost.

U.S.-bound exports climbed 16.5 percent in December from a year earlier to post their fastest increase since July.

Shipments to China jumped 20.1 percent annually in December to a record high 1.29 trillion yen ($15.70 billion) as machinery and other factory goods were in hot demand, underscoring the Japanese economy's growing reliance on China.

China, whose economy likely overtook Japan's in 2010 as the world's second largest, remained Japan's biggest trading partner for the full year for a second straight year with exports climbing 27.9 percent to a record 13 trillion yen ($158 billion).

"There is a growing view that the U.S. economic recovery will pick up... I think demand from Asia will continue to grow this year if Asian central banks manage to control inflation," said Yoshimasa Maruyama, economist at Itochu Corp.

"I don't see the Bank of Japan adopting additional easing steps from an economic point of view," he added, although he did not rule out political pressure on the bank to expand its asset buying scheme given the country's persistent deflation.

The real exports index calculated by the BOJ to track changes in export volume rose 7.3 percent in December from the previous month, posting its first increase in five months and its fastest growth since April 2009.

The central bank is seen paying close attention to export data as it tries to gauge when the economy will come out of its current doldrums. The BOJ this week maintained its assessment hat economic growth is pausing, even after the government upgraded its views.

Exports have hit a soft patch since last summer as the yen jumped to 15-year highs and key economies such as the United States and China slowed.

The trade balance in December came to a surplus of 727.7 billion yen, up 34.1 percent from a year earlier. That compared with the median forecast for a 450.0 billion yen surplus.

(Editing by Edmund Klamann)