Japan registered its largest-ever monthly trade deficit of ¥1.6294 trillion in January as costs of fossil fuel imports surged with the yen sliding sharply, despite a moderate recovery in exports, the government said Wednesday.
The value of imports rose 7.3 percent year on year to ¥6.4286 trillion, up for the third straight month, as oil product and liquefied natural gas imports jumped 33.7 percent and 11.4 percent, respectively, the Finance Ministry said in a preliminary report, noting the deficit was the largest among comparable figures available since January 1979.
The deficit with China, Japan’s biggest trading partner, hit a record ¥654.6 billion against a backdrop of rising imports of communications devices such as smartphones and electronic parts, including semiconductors.
Exports, however, climbed for the first time in eight months in January, up 6.4 percent to ¥4.7992 trillion, on the back of the weakening yen and hopes for a global economic recovery.
Still, Japan’s trade balance is unlikely to improve soon, as Prime Minister Shinzo Abe’s policy of pursing drastic monetary easing could keep the yen on a downward path for the time being as oil and gas import costs look likely to grow as a result of the suspension of nuclear reactors at home, analysts said.
“In the short term, the yen’s decline has a larger influence on import prices than export prices,” as about 77 percent of imports are denominated in foreign currencies, compared with nearly 62 percent of exports, said Taro Saito, senior economist at NLI Research Institute in Tokyo. “It would take around six months for export growth stemming from the yen’s fall to help reduce the nation’s trade deficit.”
The ministry said the yen fell against the dollar by 12.4 percent from a year earlier in January, amid expectations of Abe’s economic policy, dubbed “Abenomics,” centering on the Bank of Japan’s aggressive monetary easing.
The depreciation of the yen pushes up import costs, while it boosts exports by making domestic firms’ products cheaper and more in demand in other countries while raising the value of their sales revenue in yen terms.
Imports have also ballooned in the country as demand from utilities for fossil fuels has surged amid the continued shutdown of most of the nation’s atomic power since the 2011 Fukushima nuclear disaster started.
“The trade deficit means the yen can’t just keep weakening,” said Takeshi Minami, chief economist at Norinchukin Research Institute Co. in Tokyo. “Abe will probably restart some nuclear plants after the Upper House poll in July, as, without them, the costs to the economy are too great.”
The nation imports more than 90 percent of its energy resources from overseas, according to government data.
Mitsumaru Kumagai, chief economist at Daiwa Institute of Research, said exports appear to have bottomed out, but the pace of growth is still “tepid.”
Exports to the United States rose for the first time in two months in January, up 10.9 percent, while those to China increased 3.0 percent, marking the first growth in eight months amid the waning effects of a Chinese consumer boycott of Japanese products sparked by the Senkaku isle dispute.
Shipments to the 27-member European Union, however, remained lackluster, falling 4.5 percent in January and reflecting the sluggishness of the region’s real economy.