Fuel imports put trade deficit near ¥3 trillion

Record offsets recovering exports as energy needs soar in first half

Kyodo

The trade deficit grew to a record ¥2.915 trillion from January to June as rising energy imports more than offset a recovery in exports, the government said Wednesday.

The sluggish outcome highlights the difficulties faced by the economy, which has been affected by a stronger yen, a gloomy global outlook amid the sovereign debt crisis in Europe and growing demand for nonnuclear energy resources.

For June alone, the trade balance recovered slightly to end with a surplus of ¥61.7 billion, the first black ink in four months, the Finance Ministry said in a preliminary report. The result beat market forecasts, but analysts warned of exports slowing down even more.

For the first half, the value of exports grew 1.5 percent from the same period a year before to ¥32.595 trillion, mainly helped by robust shipments of autos and auto parts to the United States, China and Thailand.

The value of imports jumped 7.4 percent to ¥35.511 trillion as demand for energy resources, particularly liquefied natural gas, rose to make up for the complete loss of nuclear power.

The figures were measured on a customs-cleared basis.

The trade deficit was the biggest since the government began records in 1979. The reference exchange rate for the six months came to ¥79.60 per dollar, a rise of 3.1 percent that caused additional downward pressure on exporters’ earnings, the Finance Ministry said.

The situation in Europe has weighed heavily on Japanese exports, not only in direct shipments to the region but also to Asian economies that use components made in Japan to build final products for the European market, where consumer and business sentiment has been deteriorating amid the eurozone fiscal and banking crisis.

Exports to the 27-nation European Union slowed 9.0 percent with the balance staging a surplus of ¥171.6 billion, the smallest on record. Exports to Asia as a whole shed 3.6 percent, while those to China, Japan’s biggest trade partner, slid 8.6 percent with the balance coming to ¥1.405 trillion in the red.

“The global economy has shown signs of declining and this will weigh on (Japan’s) exports,” Lee Chi Woong, an economist at Goldman Sachs Japan Co., said in a report, while adding the restart of some nuclear reactors and stability in energy costs would help reduce imports and improve the trade balance.

Exports to the United States recovered by 21.0 percent, with the balance standing at ¥2.482 trillion in Japan’s favor.

In June, overall exports lost 2.3 percent to reach ¥5.643 trillion in the first decline in four months, while imports fell 2.2 percent to ¥5.582 trillion, the first fall in 30 months.

The data triggered mixed reactions from experts. The surplus for June, which came against expectations of a continued deficit and was mainly due to lower prices for energy imports, prompted upbeat assessments, but at the same time some expressed worry about slowing exports.

“Exports may have entered a phase of losing momentum,” said Mitsumaru Kumagai, chief economist at Daiwa Institute of Research.