Third-largest trade deficit logged in May

Kyodo

Japan registered its third-largest trade deficit ever in May and extended the red ink to a third consecutive month, affected by growing energy resource imports and a decline in exports to Europe, the government said Wednesday.

The deficit in the goods trade balance at ¥907.3 billion was the largest for the month of May since comparable data became available in January 1979, and even surpassed the deficit of ¥860.7 billion marked in May 2011 in the wake of the Great East Japan Earthquake.

Analysts warn that uncertainty remains over the trade environment surrounding Japan, citing the increasingly gloomy economic outlook for Europe due to the region’s sovereign debt problems and the ripple effects on other economies, including China, as risk factors that may offset the impact of recently falling energy prices.

Imports increased 9.3 percent from a year earlier to ¥6.142 trillion for the 29th consecutive monthly gain as Japan boosted imports of fossil fuels such as liquefied natural gas to cover the loss of nuclear power because of the Fukushima meltdown crisis.

Energy prices have recently been falling, but there is usually a one-month time lag for the trend to be reflected in the survey, a Finance Ministry official said.

The value of exports rose 10.0 percent to ¥5.235 trillion for the third straight monthly increase on robust shipments of motor vehicles and auto parts, the ministry said in a preliminary report.

Satoshi Osanai, an economist at Daiwa Institute of Research, said the export growth should not be taken at face value, citing the low comparison base of the year-earlier figure.

“Situations prompting the nation to record trade deficits are likely to continue for the time being,” he said, noting export growth will likely be limited due to the effects of the European sovereign debt crisis, including the yen’s appreciation against the euro.

In May, exports to the 27-member European Union fell 0.9 percent to ¥556.4 billion, extending their losing streak to eight months on slower shipments of electronic components and motorbikes.

Reflecting increased vehicle shipments from Germany, imports from the EU rose for the first time in two months, contributing to Japan’s first ever trade deficit with the region, totaling ¥11.1 billion.

Exports to the United States increased 38.2 percent to ¥891.4 billion, the seventh straight monthly gain, on greater shipments of vehicles and auto parts. The trade balance with the United States came to a surplus of ¥334.4 billion, more than triple from a year earlier.

Exports to China, Japan’s biggest trade partner, gained 3.0 percent to ¥966.2 billion for the eighth straight monthly increase.