The trade deficit nearly doubled in October as growth in imports outpaced robust increases in exports to the U.S. and China, the Finance Ministry reported Wednesday.
The weakening of the yen over the past year has helped exports, but it has also increased the cost in yen terms for imports, especially of oil and natural gas to help offset the loss of generation capacity from nuclear plants idled after the 2011 Fukushima crisis.
A 68 percent increase in costs for imported crude oil in October helped push the trade deficit up 96 percent over a year earlier to ¥1.09 trillion, the preliminary customs data showed. Imports surged 26 percent year-on-year to ¥7.2 trillion, while exports climbed nearly 19 percent to ¥6.1 trillion.
It was the 16th straight month of deficits, which also reflect lackluster demand for exports thanks to a slowdown in growth in China and other developing economies.
In yen terms, vehicle exports jumped 24 percent over a year earlier. Exports of chemicals, machinery and electronics also rose at a double-digit pace. But the offshoring of much of the nation’s manufacturing is increasing the costs for industrial components such as semiconductors and optical lenses, further eroding net export growth. Imports of electronics rose 28 percent.
Trade trends over the past year illustrate the challenges Prime Minister Shinzo Abe faces as he seeks to reinvigorate the economy with a combination of lavish spending, monetary easing and economic reforms that so far have yet to materialize but are meant to sustain growth in the longer run by improving Japan’s waning competitiveness.
The weaker yen has fattened the bottom lines, especially in yen terms, of many major companies who earn a large share of their profits overseas. But it also has raised costs for energy and for many other imports of both industrial and consumer goods.
Abe has vowed to restore the “monozukuri” (making things well) manufacturing sector, to help restore the country’s economic power and retain relatively well-paying jobs that have supported strong consumer demand in the past. But corporations continue to move operations overseas, seeking lower costs and proximity to faster growing markets.
“The shrinking of manufacturing industries is inevitable because of the growth in the newly industrialized countries,” Yukio Noguchi, an adviser to the Institute of Financial Studies at Tokyo’s Waseda University.
“The Abe government tries to prevent the shrinking of the manufacturing industry, but this is mistaken because this cannot be done,” Noguchi said.
The United States remained Japan’s biggest export market, with shipments rising 26 percent from the year before to ¥1.16 trillion, while exports to China climbed 21 percent to ¥1.15 trillion.