Japan logged a trade deficit last year for the first time since 2015, with export growth slowing amid tensions between the nation’s two biggest trading partners — China and the US.
The nation logged a deficit of ¥1,203 billion (US$11 billion) after two years of surplus, with annual growth in exports slowing to 4.1 percent from 11.8 percent in 2017, data released by the Japanese Ministry of Finance showed yesterday.
Exports to China increased 6.8 percent, markedly slower than the previous year’s 20.5 percent growth.
Growth in shipments to the US slowed to 2.3 percent from 6.9 percent.
“US-bound exports were not strong, but still solid, whereas shipments to Asia, notably to China, slowed down,” Norinchukin Research Institute chief economist Takeshi Minami said.
“US-China trade tensions should be blamed for that,” Minami said.
The trade dispute negatively affected Japanese companies’ exports of parts and devices for assembly of finished products at Chinese factories, as well as exports from China by Japanese businesses operating there, he said.
“If the global economy carries on as it is now, we cannot expect growth in exports,” he said, adding that Japan’s trade figures could worsen in the coming months.
Japan is to hike its sales tax from 8 percent to 10 percent in October, which could mean a spike in consumer demand before the new rate.
“This could boost imports until September, which could expand Japan’s deficits,” he said.
Japan last month logged a deficit of ¥55.3 billion, compared with a surplus of ¥356 billion a year earlier.
Exports for the month were down 3.8 percent, while imports rose 1.9 percent.
The data was published hours before the Bank of Japan (BOJ) announced it was lowering its inflation forecast for the fiscal year ending March next year to 0.9 percent from 1.4 percent.
After a two-day meeting the policy board left its mammoth monetary easing program in place, as expected.
BOJ Governor Haruhiko Kuroda said the decision to revise down the forecast was “due primarily to the decline in crude oil prices,” but added that it would only be temporary.
“It is true that it will take some time for us to achieve the 2 percent target,” he told reporters, referring to the bank’s long-held goal.
“It is our belief that the most appropriate way is to patiently continue the existing monetary easing,” he added.
The downward revision follows a previous downgrade in late October last year.
The bank also slightly lowered the inflation forecast for the current fiscal year ending March to 0.8 percent from 0.9 percent, and reduced the projection for the year ending March 2021 to 1.4 percent from 1.5 percent.
Those figures do not factor in the effects of the sales tax hike expected to go into effect in October.
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