Photo/Illutration The Finance Ministry in Tokyo's Chiyoda Ward (Asahi Shimbun file photo)

Japan's export growth slowed in March, dragged down by a drop in China-bound shipments of cars and steel in a slide that underscores concern about slackening global demand amid higher interest rates and Western banking-sector jitters.

Import growth outpaced exports in March, due to the hefty cost of coal, crude and oil products, helping bring the annual trade deficit in the world's third-biggest economy to a record 21.7 trillion yen ($161 billion). It exceeded the previous record of 13.7 trillion yen in fiscal 2013.

The yen's depreciation by 16.5% from the same month a year earlier also boosted the value of imports, rather than driving up external shipments as Japanese exporters have shifted production overseas during previous periods of yen strength.

Thursday's data, released by the Ministry of Finance, showed exports rose 4.3% in March from a year earlier, logging a 25th straight month of increase, led by shipments of U.S.-bound cars. That was above economists' median estimate of a 2.6% gain, but below a 6.5% increase in February.

Analysts say Japan's trade deficit will persist for the time being as exports weaken.

"Chinese consumption lacks strength even after zero-COVID curbs were lifted," said Takeshi Minami, chief economist at Norinchukin Research Institute.

"Effects of the fully-fledged monetary tightening in the West since last summer will play out in their economies, causing Japan's exports to turn downward going forward."

A months-long global monetary policy tightening streak to curb red-hot inflation has raised the specter of a worldwide recession, while the recent failure of two mid-sized U.S. banks as well as troubles at Credit Suisse, have raised worries about a credit crunch.

Thursday's data showed imports rose 7.3% in the year to March, below the median estimate of an 11.4% increase and after the prior month's 8.3% gain.

The trade balance in March came to a deficit of 754.5 billion yen versus the median estimate for a deficit of 1.29 trillion yen in March, after a shortfall of 897 billion yen in February.

By region, exports to the United States grew 9.4% in the year to March, slowing from the 14.9% seen in the previous month.

Exports to China, Japan's largest trading partner, fell 7.7% year-on-year in March, a fourth straight month of declines, the trade data showed.

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