The 7.6 per cent annual increase in exports in July was bigger than the median estimate for 5.5 per cent annual growth expected by economists in a Reuters poll, but still slower than June's robust 9.5 per cent year-on-year rise.
Slowing export growth in July suggests overseas demand in third quarter may not be strong enough to help Japan's gross domestic product recover from an annualised 1.6 per cent contraction in April-June as exports slumped and consumers cut back spending, raising questions about the need for more official economic stimulus.
"Exports to Asia look a little sluggish," said Hidenobu Tokuda, senior economist at Mizuho Research Institute.
"There is still time for exports to recover, but as of now they look a little weak. I don't think we need stimulus measures now, but this could become more likely heading into next year."
Exports destined for China, Japan's largest trading partner, rose 4.2 per cent in July from a year ago, compared with June's 5.9 per cent annual increase, finance ministry data showed.
Shipments to Asia rose 6.1 per cent year-on-year in July, versus a 10.1 per cent annual increase in the previous month.
In one bright spot, Japan's exports to the United States rose an annual 18.8 per cent in July, more than a 17.6 per cent annual increase seen in June, thanks to larger shipments of cars and medicines.
Imports fell 3.2 per cent in year-on-year in July versus the median estimate for a 7.9 per cent annual decrease as the cost of crude and liquefied natural gas fell.
The trade balance was a deficit of 268 billion yen ($2.2 billion), versus the median estimate for a 56.7 billion yen deficit.
The economy is expected to resume growing in the current quarter if consumer spending bounces back, but weaker exports suggest that the overall pace of expansion may not be enough to generate the price growth needed to banish the risk of returning to deflation.
© Thomson Reuters 2015