(Adds data on U.S. trade balance, domestic demand) * Exports rise fastest in over 2 yrs, imports jump most in over 3 * May exports +14.9 pct yr/yr vs f'cast +16.1 pct * Imports +17.8 pct yr/yr vs f'cast +14.8 pct * Solid global demand expected to support Japan's economy By Stanley White TOKYO, June 19 (Reuters) - Japan's exports surged in May by the fastest in more than two years on higher shipments of cars and steel, an encouraging sign that robust global demand will help keep the country's modest economic recovery on track.
The 14.9 percent annual increase in exports in May was the biggest rise since January 2015 and nearly twice the pace seen in April, though it was below analysts' expectations of 16.1 percent.
Japan's imports rose more than expected in May, partly due to increasing demand for intermediate goods companies need to manufacture their products.
Exports are likely to continue rising at a steady clip as overseas economies show increasing signs of strength, which should help Japan's economy extend its recent run of expansion.
"The main scenario is Japan's exports will continue to recover," said Shuji Tonouchi, senior market economist at Mitsubishi UFJ Morgan Stanley Securities.
"However, the pace of growth could slow somewhat as inventories of certain goods, like electronics, start to build up overseas." Exports of cars and car parts rose partly because an earthquake in Kumamoto last year in May temporarily shut down production of these goods, Tonouchi noted.
TRADE SURPLUS WITH U.S. SURGES Japan's exports to the United States rose 11.6 percent in May from a year ago, the fastest increase since July 2015, due to an increase of shipments of autos and auto parts.
The trade surplus with the United States was 411.1 billion yen ($3.71 billion) in May, up 19.0 percent from the same period a year ago. In April, Japan's trade surplus with the United States fell an annual 4.2 percent.
A large trade surplus could draw criticism from the Trump administration, which has repeatedly indicated that it prefers protectionist policies to reduce the U.S. trade deficit and increase exports.
Exports to China increased 23.9 percent year-on-year in May, following a 14.8 percent annual increase in April.
Larger shipments of flat panels and semiconductor manufacturing equipment drove the gains in China-bound exports.
Exports to Asia, which includes China, rose 16.8 percent in May from a year ago, the fastest increase in three months, due to increased shipments of electronics to Hong Kong and steel to Indonesia, the data showed.
In terms of volume, Japan's exports rose 7.5 percent in May from a year ago, the fastest gain in three months, another indication that overseas demand is firm.