Fri, Feb 21, 2014 - Page 15 News List

Higher import costs push Japan’s trade deficit to new high

Bloomberg

Japan’s trade deficit widened to a record last month as surging import costs weighed on Japanese Prime Minister Shinzo Abe’s campaign to drive a sustained recovery.

The ¥2.79 trillion (US$27.3 billion) shortfall reported by the Ministry of Finance in Tokyo yesterday exceeded the ¥2.49 trillion median estimate in a Bloomberg News survey of 28 economists.

Imports rose 25 percent from a year earlier and outbound shipments gained 9.5 percent.

Declines in the yen are driving up import costs as the nation’s nuclear reactors remain shuttered, while exports have seen only limited gains from the currency’s slide of more than 20 percent against the US dollar in the past two years.

The trade deficit contributed to Japan’s economy growing a less-than-forecast 1 percent in the fourth quarter, underscoring the risk that Abenomics may falter after a sales-tax increase in April.

“Japan is paying the price for the transformation of its energy policy,” said Naohiro Niimura, a partner at Market Risk Advisory Co in Tokyo. “This trend in Japan’s trade balance will continue for a while, eroding the strength of the economy little by little.”

The trade deficit with China was the widest in comparable data back to 1979. The Lunar New Year holiday may have weighed on exports to China and other Asian nations last month, an official said in a briefing after the release.

The yen slid to a five-year low of ¥105.44 per US dollar on Jan. 2 and is down more than 8 percent in the past 12 months. The Japanese currency rose 0.2 percent to ¥102.24 yesterday morning and the TOPIX was down 0.8 percent.

Ahead of yesterday’s release, analysts’ median forecasts were for an 12.7 percent gain in exports and an 22.7 percent increase in imports.

By volume, exports fell 0.2 percent last month, the first decline in four months, while imports gained 8 percent.

“The effect of the yen’s depreciation on exports has been so slow,” former Bank of Japan deputy governor Kazumasa Iwata told reporters in Tokyo yesterday.

Iwata also highlighted declines in the competitiveness of Japanese industries and production shifting overseas.

Swelling energy imports are contributing to the trade shortfall, with all of Japan’s 48 operable nuclear reactors shut for inspections after the 2011 Fukushima Dai-ichi nuclear crisis and it has no set date for restarting them. Electric utilities’ output from fossil-fuel thermal plants rose to a record level last month.

Crude oil imports rose 28.1 percent from a year earlier and inward shipments of liquefied natural gas increased 21.4 percent.

The data followed a record annual trade deficit last year.

“The trade deficit could widen further through March due to demand picking up ahead of the sales-tax increase,” Koya Miyamae, an economist at SMBC Nikko Securities Inc in Tokyo, wrote in an e-mailed note after the release.

The shortfall could shrink from April as domestic demand weakens, though nuclear power plant closures and the diminished boost to exporters from the weaker yen may mean that deficits continue, he said.

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