Japan on Wednesday posted its worst April trade deficit as a weak yen ramped up import costs and helped extend the run of monthly shortfalls to the longest in over three decades.
Data from the Finance Ministry showed the nation incurred a trade deficit for the 10th straight month, with the red ink expanding by a worse than expected 69.7 percent on year to ¥879.9 billion.
Trade data are closely watched to gauge Prime Minister Shinzo Abe’s progress in firing up Japan’s export-led economy. Expectations for Abe’s progrowth, prospending policies have weakened the yen more than 20 percent against the dollar over the past six months and boosted share prices to their highest level in more than five years.
But the latest data could be a sign that a rebound in exports has yet to outweigh higher imports on the back of the weaker yen and greater energy needs.
The deficit was the biggest for the month of April since comparable official data began to be kept in 1979, and was worse than an average shortfall of ¥620 billion forecast by economists polled by the Nikkei business daily.
It was also the longest run of monthly deficits since a 14-month sequence from July 1979 to August 1980.
“Exports may recover further but because import costs are rising quite a bit, trade deficits will likely continue,” said Junko Nishioka, chief economist at RBS Securities Japan. The latest set of figures indicated that the “worst period” is over for exports, she said.
Taro Saito, senior economist at NLI Research Institute, said, “The possibility is high that exports will stay robust during the April-June period on the back of the effects of the yen’s depreciation.”
The pace of improvement in the trade balance “is expected to be moderate in fiscal 2013” through next March, as imports are unlikely to decrease soon, he said.
Takeshi Minami, chief economist at Norinchukin Research Institute, echoed that view, saying the nation’s trade balance may not move into the black until the middle of next fiscal year.
In April, exports rose 3.8 percent to ¥5.78 trillion while imports jumped 9.4 percent to ¥6.66 trillion.
The yen’s average rate was 96.01 to the dollar in the reporting month, against 82.31 a year ago, meaning the value of the Japanese currency fell by nearly 17 percent on year, the ministry data showed. A lower yen helps Japanese exporters but pushes up import bills.
Higher import costs have resulted in higher materials and parts prices, which are in turn leading to higher retail prices of various items, ranging from foodstuffs to laptops. With the yen hitting multiyear lows against the dollar, some politicians have started voicing concerns over its negative impact on people’s lives.
Fuel imports have also stayed high because all but two nuclear reactors remain offline.
By region, U.S.-bound exports in April jumped 14.8 percent to ¥1.10 trillion, the highest figure logged since October 2008, on the back of strong shipments of automobiles.
Info from Dow Jones Newswires added