By Makiko Yamazaki
TOKYO, Oct 21 (Reuters) - Japan's exports rose 16.7% in September from the same month a year earlier, government data showed on Wednesday, as strong demand for semiconductors and AI-related products continued to underpin growth.
The 13th month of gain followed a 19.3% rise in August, Ministry of Finance data showed, though it fell short of a median market forecast of 20.1%.
Global investment in artificial intelligence continued to support Japanese exports of semiconductors and related
equipment, with investment by South Korean chipmakers boosting demand for Japanese chipmaking tools.
Automobile exports also held up well, especially to Europe, where economic recovery has helped lift demand.
"AI demand should continue to underpin Japan's exports, but downside risks from the Middle East remain, with a prolonged conflict potentially weighing on global demand through persistently high energy prices," said economist Koki Akimoto at the Daiwa Institute of Research.
A potential slowdown in US AI investment is a tail risk that could curb Japan's exports by weakening semiconductor-related demand from other Asian economies that supply the US, Akimoto said.
By destination, exports to the US rose 22.9% in September from a year earlier, while shipments to China increased 8.6%.
Imports in September rose 18.9% on year compared with economists' median forecast of 19.6%.
Growth in imports slowed from 28% in August due to lower crude oil arrivals after tankers rerouted away from the Bab el-Mandeb Strait when the Yemen-based, Iran-aligned Houthi militia declared a naval blockade against Saudi Arabia, delaying deliveries to Japan.
For October, crude oil procurement is set to recover to around 100% of the level seen in the same month a year earlier, as tankers travelling via the Suez Canal arrive, the government has said.
Slower imports helped narrow Japan's trade deficit to 536.6 billion yen ($3.39 billion) in September from 1.1 trillion yen in the previous month.
That compared with a market-estimated deficit of 181 billion yen.
The data indicates external demand remains supportive of the economy, though uncertainty over the global outlook brought about by conflict and volatile AI sentiment continues to cloud exporter prospects.
The Bank of Japan will hold a policy meeting this month at which it will release quarterly growth and inflation forecasts that markets will scrutinise for clues on the timing of the next interest rate hike.
($1 = 158.2600 yen)
(Reporting by Makiko Yamazaki; Editing by Jacqueline Wong and Christopher Cushing)
