Japan’s trade deficit widened to its largest level in five months last month, adding to worries over the recovery amid weakening demand in China for chemicals, machinery and electronics.
Though exports rose 7.6 percent from a year earlier, imports fell just 3.2 percent, less than forecast. The resulting ￥268.1 billion (US$2.2 billion) deficit reported yesterday compared with a deficit of ￥70.5 billion in June and was the biggest since Feburary.
Japan’s economy contracted at a 1.6 percent annual pace in April-June after a 4.5 percent expansion in the first three months of the year, sapped mainly by weaker than expected consumer spending, though exports also were a drag on growth, falling at a 16.5 percent annual pace.
Photo: Reuters
“The trade deficit widened in July, and should continue to rise in coming months as the weaker yen pushes up import costs,” Marcel Thieliant of Capital Economics said in a research note.
However, China’s recent move to devalue the yuan, making its own products more price competitive in overseas markets, has further deepened unease over the trade outlook.
The Japan External Trade Organization (JETRO) on Tuesday issued a report showing declining exports in the first half of the year to China, Japan’s biggest trading partner.
Measured in US dollar terms, demand for imports of electronic devices — a mainstay of Japanese manufacturing — was nearly flat, while exports of machinery fell 12.3 percent and exports of chemicals fell nearly 11 percent, it said.
Asian exporters are all seeing a weakening in exports, accentuated by slowing Chinese demand, Mizuho Bank said in a research note.
“As such, even in the midst of robust US demand now, electronics exports from Asia have not been able to record gains seen in the pre-2007 period,” it said.
Japanese manufacturers have long relied on strong exports to compensate for weak demand at home, and the recovery of demand in the US is helping to offset China-related weakness in Asia.
Last month, Japan’s exports to China rose 4.2 percent from a year earlier, while shipments to the US jumped 18.8 percent, helped by a 41 percent jump in exports of vehicles and parts. Imports from the Middle East fell 40.5 percent as the value of imports of oil, gas and other fuels fell by about one-third.
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