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July exports +10.3% yr/yr vs forecast +11.4%

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Imports rise 16.6% yr/yr in July

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Total value boosted by weak yen, outlook dim - economist

(Adds economist comments)

By Makiko Yamazaki

TOKYO, Aug 21 (Reuters) - Japan's exports rose at a

slightly slower pace than expected in July and shipment volumes

extended their declines, data showed on Wednesday, adding to

some doubts about the outlook for an economy that has only just

started to pick up the recovery pace.

The outcome follows separate data last week that showed

Japan's economy rebounded strongly in the second quarter on

robust consumption, backing the case for the central bank to

continue its monetary policy tightening campaign.

Japanese exports rose 10.3% year-on-year in July, up for an

eighth straight month, data from the Ministry of Finance showed,

less than a median market forecast for an 11.4% increase. The

sales were boosted by a weaker yen and compared with a rise of

5.4% in June.

Overall shipment volumes, however, fell 5.2% last month from

the year-ago period, the sixth consecutive month of declines,

suggesting the weaker yen was masking underlying softness in

global demand.

"The falling volumes suggest struggling global demand, even

though the weak yen boosted the total value," Takeshi Minami,

chief economist at Norinchukin Research Institute, said.

"The outlook for global demand also remains dim as real

estate woes continue to weigh on the Chinese economy and the

U.S. jobs market is cooling. And if the yen rebounds further,

Japan's exports would also slow in terms of value," he said.

Exports to China, Japan's biggest trading partner, rose 7.2%

in July from a year earlier due to strong demand for chip-making

equipment, while those to the United States were up 7.3%, the

data showed.

Imports grew 16.6% in July from a year earlier versus a

14.9% increase expected by economists.

The trade balance stood at a deficit of 621.8 billion yen

($4.28 billion), compared with a forecast deficit of 330.7

billion yen.

The emerging signs of sustained wage growth and expectations

it would help inflation durably reach the Bank of Japan's 2%

target were key factors behind the BOJ's recent interest rate

increases.

However, the central bank is facing challenges as it shifts

away from a decade of ultra-loose monetary policy, including the

squeeze on households from the rising cost of living.

Policymakers' hopes that the export-engine will help bolster

the economy have been undercut by uneven overseas demand and

softness in major market China.

Governor Kazuo Ueda has said the BOJ will keep raising rates

if the economy and prices move in line with its projection, but

the past year's broadly fragile recovery and the hit to

consumption from a weak yen have continued to raise uncertainty

about the policy normalisation path.

($1 = 145.2700 yen)