By Stanley White
TOKYO (Reuters) - Japan's exports are expected to rise for the first time in three months in July - a tentative sign that demand overseas is starting to recover, which could raise hopes that exports can offset a slump in consumer spending.
A Reuters poll of 26 economists forecast that exports would increase 3.8 percent in the year to July, with a 1.7 percent annual decline in imports, led largely by a temporary slowdown of crude oil and other energy imports.
The trade deficit was forecast at 702.5 billion Japanese yen (4.1 billion pounds), which would be a 24th straight monthly deficit.
"Shipments of cars to Europe and Asia are gradually starting to gain strength," economists at Norinchukin Research Institute said in response to the poll.
"Imports will fall due to a decline in energy imports and due to the fact that domestic demand is recovering at a slow pace."
The Ministry of Finance (MOF) will announce the trade data on August 20 at 8:50 a.m. (12.50 a.m. BST).
A sales tax hike last quarter drove Japan's economy into its biggest contraction since the March 2011 earthquake and tsunami, showing consumer spending slumped more than expected, gross domestic product data showed this week.
A large decline in real wages and weak spending on non-durable goods shown in the data has raised some concerns that domestic demand is not as strong as some economists expected.
Policymakers at the Bank of Japan and in the government are counting on a pick-up in exports to offset the slump in domestic demand that followed the sales tax increase to 8 percent from 5 percent on April 1.
Japan's economy is expected to rebound in the current quarter, but if growth falters it will become more difficult for the government to carry out a further sales tax increase to 10 percent scheduled for next year.
It would also become more difficult for the BOJ to argue that its massive quantitative easing campaign will pull Japan out of 15 years of deflation, and may require even bolder measures.
(Editing by Eric Meijer)